Dim economic growth outlook due to rising interest rates: Australian Finance Minister


Newly appointed treasurer Jim Chalmers said Australia’s economic growth outlook would be affected by rising interest rates.

The warning is issued after a discussion between Reserve Bank of Australia (RBA) Governor Philip Lowe and an accountant as the central bank is trying to curb fast-growing inflation.

The RBA has clearly stated its intention to raise interest rates further in 2022, following the first cash rate hike since 2010.

“The Reserve Bank is very positive about interest rate trajectories as inflation soars, which is expected to worsen before it improves,” he told Canberra reporters.

“They will obviously affect the economy.”

Meanwhile, Luci Ellis, RBA’s Vice President of Economics, refused to speculate on what level the cash rate would reach due to the complexities of Australia and the global economy.

Inflation is skyrocketing globally, and Australia’s labor market is currently in a very difficult situation, but real wages are declining, according to the Vice-Governor.

Moreover, while the war between Russia and Ukraine is still ongoing, the blockade of COVID-19 imposed on parts of China exacerbates supply chain disruption.

“It seems inappropriate to make predictions in the light of so many events.” Ellis said..

“The Board has already said that there is much more to be done from here, but we will monitor the data and evidence very carefully and figure out what is the right action.”

Economists also expect the RBA to raise its cash rate between 0.25% and 0.5% at its June 7 board meeting.

Epoch Times Photo
On July 31, 2021, a construction site can be seen vacant in Parramatta’s Central Business District in Sydney, Australia. (Lisa Marie Williams / Getty Images)

in the meantime, New data from the Australian Bureau of Statistics Construction work showed a decline in the March quarter, which was expected to pose a downside risk to economic growth.

In particular, the total amount of construction work done in the March quarter was down 0.9% to about $ 53.7 billion ($ 37.98 billion).

In addition, the value of construction work done during this period decreased by 1.3% to $ 30.1 billion, while residential and non-residential construction shrank by 0.9% and 1.8%, respectively.

Engineering work also fell 0.4% to $ 23.6 billion.

Ellis hinted that the housing construction industry is likely to reach that capacity, but she said it wasn’t the result of land availability or government approval issues.

“I’ve heard from construction industry contacts that delays are common.” Ellis said..

“Usually it takes about 6 months to build a single-family home. Now they tell us that it’s about 9 months on average.”

Ellis said supply chain disruptions have contributed to some of these delays as the industry faces a shortage of building materials.

“Workforce availability is also an issue, especially in Western Australia, but it’s not unique to construction,” she said.

Alfred buoy

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Alfred Bui is a Melbourne-based Australian reporter with a focus on local and business news. He is a former small business owner and holds two master’s degrees in business and business law. Contact him at [email protected]

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