Reserve Bank interest rates: Deputy boss Andrew Hauser confident three hikes won’t push unemployment up much
Reserve Bank deputy boss Andrew Hauser is confident three consecutive interest rate hikes this year won’t lead to surging unemployment while warning inflation ‘remains far too high’.
Reserve Bank deputy boss Andrew Hauser is confident three consecutive interest rate hikes this year won’t lead to surging unemployment while warning inflation “remains far too high”.
The comments came as core inflation — watched closely by the RBA as it strips out volatility — surged 0.2 points to 3.6 per cent in fresh data from the Australian Bureau of Statistics.
Forecasts by the central bank in May had warned core inflation may hit 3.8 per cent before falling back into the 2 to 3 per cent target band late next year.
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Dr Hauser said the rate rises through February, March and May would ease the cost of living burden without driving unemployment up.
“The goal of tighter policy is to deliver a period of below-trend demand growth, reducing capacity pressures and returning inflation to target,” he told the Sir Douglas Copland Memorial Lecture in Melbourne on Wednesday.
He said the decisions would also help anchor expectations about inflation, which economists generally consider to be a key driver of rising prices.
“The baseline projection published in May suggested that inflation would return sustainably to the midpoint of the target range over the forecast period, with only a limited increase in unemployment,” Dr Hauser said.
A resolution of the Middle East conflict bringing down oil prices would also “be a welcome development”.
The speech explaining the link between rising costs and the jobless rate follows years of scrutiny from a small number of commentators about the impact of rate hikes.
Yet an enormous tightening of RBA policy from an emergency low of 0.1 per cent in 2020-22 to more than 4 per cent barely budged unemployment from multidecade lows.
That lends credibility to the principle that using interest rates to slow white hot demand will not spark big jobless jumps — with RBA boss Michele Bullock repeatedly saying the cental bank wants to preserve the strong labour market as much as possible while fighting inflation.
Dr Hauser said a tight jobs market would mean major moves in the inflation rate would only lead to small rises in unemployment.
A looser employment market might be hit by big shifts in jobless numbers amid only small inflation changes.
