Comment on Latest Inflation Figures

“The quarterly increase of 2.1% in the Consumer Price Index (and 5.1% for the year) reflects a combination of strong domestic demand and a mix of imported and local cost pressures. While some of these pressures are temporary, it will take some time for them to reverse. In the meantime, the reduction in fuel excise, the increased payments to households and the boost to tax refunds to be paid in coming months will help address cost of living pressures on households,” Mr Innes Willox, Chief Executive of the national employer association Ai Group said today.

“The risks of ongoing domestic inflation and a more rapid increase in interest rates depends in large part on whether future wage rises add more inflationary pressures. While some sustainable adjustments in wages are clearly warranted, excessive wage adjustments will trigger a more decisive increase in interest rates and will constrain the further expansion of domestic activity before it has fully recovered the ground lost over the past two years.

“Australia is benefiting from a very healthy labour market with low unemployment and a rapid rise in full-time employment – particularly for women. These factors are clearly helping household budgets in the face of current price pressures, and we should be wary of bringing the progress that is being made in these areas to a premature end,” Mr Willox said.

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