The Reserve banks board has lifted the cash rate target by 0.25% in the past week, for the second month in a row causing concerns that inflation is taking too long to decrease.
The most recent monthly consumer price index by the Australian Bureau of Statistics shows an alarming rate rise of 6.8% over the year to April compared to March last year, due to last year’s temporary fuel excise tax cut.
The Reserve Bank Governor Philp Lowe has spoken out stating ‘some further tightening of monetary policy may be required’ and went on stating a warning about the constant rise of the cost of services including hospitality. Whilst the goods prices inflation rate is beginning to slow, service inflation is still high and is proving to be ‘very persistent overseas’ he said.
Whilst Lowe did not calm nerves by leaving the open possibility of further rate rises, he did inform the public that the board remains ‘resolute in its determination to return inflation to target and will do what is necessary to achieve that
These increases will see other companies and industries affected with economists predicting that interest rates could push mortgage repayments burden onto Australians in its heaviest in history, as house prices are tipped to slide into reverse in the coming months.
Westpac was the first of the four major banks to pass on this week's interest rate rise and announced on Tuesday evening that variable home loan rates will increase by 0.25% in line with the reserve banks' decision. This increase will come into effect on June 20th.