Reserve Bank of Australia sees energy prices as key concern for monetary policy

The Reserve Bank of Australia (RBA) has cited volatile energy prices as a factor of uncertainty, making it more difficult for banks to navigate the current complex economic climate.

At the ABE Annual Dinner on 9 November, RBA Vice President Michele Block said the energy situation in Europe is fraught with uncertainty.

“Gas prices have fallen recently, but are expected to rise again, especially if an unusually cold winter or Russia’s war with Ukraine escalates further.” she warned.

The lieutenant governor also noted that high global energy prices had boosted Australia’s export earnings from coal and gas, but she also put upward pressure on prices of domestic goods and services, adding to inflation. Stated.

Bullock said the RBA had factored a significant rise in energy prices into its economic outlook, but said there was a risk that it was not factored in sufficiently.

“But on the other side of the coin, global supply chain pressures are easing so quickly that it could be more of a dampening force than currently expected. she said.

Threats to RBA monetary policy

On the RBA’s monetary policy, he said there are three sources of uncertainty that threaten the central bank’s efforts to stabilize the Australian economy.

Specifically, Block said he was concerned because a downturn in China’s property market could lead to a decline in demand for Australian iron ore, the country’s main source of export revenue. .

Epoch Times photo
Pedestrians pass the Reserve Bank of Australia (RBA) building in Sydney, Australia, 18 October 2022. (Lisa Maree Williams/Getty Images)

Furthermore, she said she was concerned about signs of domestic wages rising faster than the RBA had previously expected.

As wage growth is an important driver of inflation, as pointed out in RBA reportan unexpected rise in wages could put more pressure on the consumer price index (CPI).

“Since the middle of the year, nearly half of companies have reported wage increases of 3-5%, and a further quarter have reported increases of more than 5%.” block saidciting the bank’s business contact program.

Household spending remains a source of uncertainty in the economy, but Brock said the fiscal buffers built during the COVID-19 pandemic are unlikely to continue boosting consumer spending, easing pressure on inflation. said to suggest that

This is because higher consumer spending can lead to increased demand for goods and services, which in turn creates room for businesses to raise prices, which could lead to higher inflation.

“High inflation, rising interest rates and falling house prices are eroding these sources of support to some extent, which is expected to contribute to slower consumption growth from early next year,” she said.

Alfred Bui


Alfred Bui is an Australian reporter based in Melbourne, focusing on local and business news. He is a former small business owner and holds his two master’s degrees in business and business law. Please contact [email protected]