Reserve Bank interest rates: Andrew Hauser signals RBA ready to hike again if necessary
Reserve Bank deputy boss Andrew Hauser says it will do ‘whatever is necessary’ to slow inflation and declared raising productivity Australia’s most urgent economic priority.
Deputy governor Andrew Hauser has declared the Reserve Bank will do “whatever is necessary” to slow inflation while again ringing the alarm on Australia’s productivity woes.
The hawkish comments helped send the Aussie dollar north of US71¢ and came one week after the RBA lifted the official cash rate from 3.6 per cent to 3.85 per cent amid signs consumer prices were rebounding.
He said underlying inflation — which was 3.4 per cent through 2025 — is “too high”. Yet the central bank was hopeful some of the shock would be temporary.
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By continuing you agree to our Terms and Privacy Policy.“There’s a benign story that it’s a series of one-off factors that should unwind. That’s . . . perhaps the majority,” Dr Hauser told an Australian Chamber of Commerce and Industry event in Sydney.
“But the less benign story is that some of it reflects growing underlying pressure of the pick up in demand against supply constraints.
“If that’s true, the risk is higher inflation may persist. We can’t let that happen.”
Financial markets give a 90 per cent chance of a rate hike by June..
Dr Hauser said the RBA would do “whatever is necessary to return inflation to the target band”, which is between 2 and 3 per cent.
The consumer price index briefly dipped into that zone last year but swiftly bounced back as private demand improved and financial conditions eased following three rate cuts.
Dr Hauser was reluctant to comment on the impact of government spending on inflation — much as governor Michele Bullock has also avoided weighing in.
Instead, he put the blowtorch on the country’s low productivity growth. That measures whether Australia is getting more value out of each hour worked and dollar invested.
Stronger productivity would mean the economy could grow faster without sparking inflation, helping raise wages and living standards.
“Of all the issues facing the economy over the medium term, raising the sustainable growth rate is the biggest,” Dr Hauser said.
“We have to respect the speed limit of the economy. If we try and run the economy hotter than it can run, inflation will pick up.”
He said “Australia is not alone” as countries in Asia and Europe faced similar challenges. But it would need action to fix.
Treasurer Jim Chalmers has pledged productivity will be a top priority in the second term of the Labor Government after a summit on economic reform in August.
That meeting’s proposals included cutting red tape in the building sector, speeding up environmental reforms and abolition of more trade taxes.
The Productivity Commission also recommended a series of shakeups including a major tax cut for small businesses and shifting the economy away from levies on investment.
