September 2nd 2024.
In a surprising turn of events, Treasurer Jim Chalmers has made a bold statement regarding the Reserve Bank's handling of the economy. He claims that the recent interest rate hikes are causing major damage to the economy, exacerbating the ongoing cost of living crisis. This comes amidst speculation of tension between the RBA and the federal government, and just before the release of new GDP figures on Wednesday, which are expected to reveal a meager 0.2% growth for the Australian economy in the June quarter.
Chalmers spoke out on Sunday, expressing concern about the impact of global uncertainty and rising interest rates on the economy. He stated that it would come as no surprise if the national accounts for the June quarter show a sluggish and subdued economy, as this was already anticipated at budget time and is now a consensus among economists.
The cash rate has remained at 4.35% since November 2023, the highest it has been in 13 years. Chalmers emphasized that the federal government is already working to combat inflation and provide relief for the cost of living, but these efforts are being hindered by the detrimental effects of interest rate hikes and global volatility on the economy.
Last week, during a parliamentary inquiry, the CEOs of Australia's big four banks predicted a slowdown in interest rates. However, RBA Governor Michele Bullock dismissed this as a premature hope, signaling that rate hikes may still continue. In fact, the RBA board has stated that they do not expect inflation to reach their target of 2-3% until December 2025.
Overall, Chalmers' statement highlights the concerning state of the economy and the need for careful consideration and coordination between the RBA and the federal government to alleviate the negative effects of interest rate hikes. As the GDP figures are set to be released in the coming days, all eyes will be on the state of the Australian economy and the potential impact of ongoing global uncertainty.
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