{"id":163806,"date":"2022-04-21T19:30:01","date_gmt":"2022-04-21T09:30:01","guid":{"rendered":"https:\/\/propertyupdate.com.au\/?p=163806"},"modified":"2022-04-22T17:11:16","modified_gmt":"2022-04-22T07:11:16","slug":"reserve-bank-backtracks-on-rate-rise-guidelines","status":"publish","type":"post","link":"https:\/\/propertyupdate.com.au\/reserve-bank-backtracks-on-rate-rise-guidelines\/","title":{"rendered":"Reserve Bank Backtracks on Rate Rise Guidelines"},"content":{"rendered":"

The RBA has dramatically changed its recent guidelines for a rise in official interest rates, indicating that higher rates will now likely come sooner rather than later.<\/strong><\/p>\n

The RBA has consistently stated that a rate rise was dependent on inflation being \u201csustainably within the 2 to 3 per cent target range<\/em>\u201d.<\/p>\n

The minutes of the recent RBA April meeting revealed that:<\/p>\n

\u201cinflation has picked up and a further increase was expected, with measures of underlying inflation in the March quarter expected to be above 3 per cent.\u201d<\/p><\/blockquote>\n

Although inflation has increased sharply over the past year - due primarily to Covid-related supply constraints driving higher fuel and housebuilding costs \u2013 the other key ingredient for higher rates - wages growth - has remained benign.<\/p>\n

The Bank has previously stated that:\u00a0<\/strong><\/p>\n

Wages growth remains modest and it is likely to be some time yet before growth in labour costs is at a rate consistent with inflation being sustainably at target.<\/p><\/blockquote>\n

The latest minutes confirm this:\u00a0 <\/strong><\/p>\n

Wages growth had also picked up but, in aggregate terms, had been below rates likely to be consistent with inflation being sustainably at the target.<\/p><\/blockquote>\n

The Bank last raised rates in November 2010 following a surge in annual wages growth over the previous year at or above 3.0% and peaking over the December quarter of 2010 at 3.9%.<\/p>\n

The latest ABS Wage Index data reports that annual wages growth over the December quarter remained at the low levels of recent years at just 2.3%.<\/p>\n

\"Wages\"<\/p>\n

The March quarter ABS Wage Index data - due to be released on May 18th<\/sup> - is unlikely to record a significant rise in annual growth given the nature of the Australian labour market \u2013 and certainly not above the 3.0% notional RBA target range.<\/p>\n

Despite the uncertain outlook on currently benign wages growth, the RBA in its latest meeting has changed its stance on rate rises stating that:<\/p>\n

These developments have brought forward the likely timing of the first increase in interest rates.<\/p><\/blockquote>\n

Higher inflation and low wages growth resulted in a fall in annual real wages over the December quarter \u2013 down by 0.3% and the first fall since the June quarter of 2014 \u2013 and likely to reach record low levels over coming quarters.<\/p>\n

An increase in interest rates without the usual precondition of consistently strong wages growth will clearly impact household budgets already straining under the highest price increases in over ten years.<\/p>\n

ALSO READ<\/strong>: How will rising interest rates affect our rental markets?<\/a><\/p>\n

<\/div>\r\n
<\/div>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The RBA has dramatically changed its recent guidelines for a rise in official interest rates, indicating that higher rates will now likely come sooner rather than later. The RBA has consistently stated that a rate rise was dependent on inflation being \u201csustainably within the 2 to 3 per cent target range\u201d. The minutes of the…<\/p>\n","protected":false},"author":50,"featured_media":120297,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[54,1186],"tags":[572,1183],"class_list":["post-163806","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-property-updates","category-weekly_latest","tag-feature-featured","tag-homepage-top"],"acf":[],"yoast_head":"\nReserve Bank Backtracks on Rate Rise Guidelines<\/title>\n<meta name=\"description\" content=\"The RBA has dramatically changed its recent guidelines for a rise in official interest rates, indicating that higher rates will now likely come sooner...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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