RBA Lifts Rates 0.5% For The Second Month In A Row
Taming rising inflation is set to put further strain on household budgets.
Taming rising inflation is set to put further strain on household budgets.
At its meeting today, the Reserve Bank of Australia decided to increase the cash rate target by 50 basis points to 1.35%.
Monetary policy globally is responding to this higher inflation with it predicted to be some time yet before it returns to target in most countries. Further, inflation is high in Australia too, with a tight labour market and capacity constraints in some sectors contributing to upward pressure on prices.
Inflation locally is forecast to peak later this year and then decline back towards the 2-3% range next year. Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services.
According to Dr Philip Lowe, Governor of Monetary Policy at the RBA, the behaviour of household spending is of concern stating:
“The recent spending data have been positive, although household budgets are under pressure from higher prices and higher interest rates. Housing prices have also declined in some markets over recent months after the large increases of recent years.”
As for what’s ahead for the Australian economy and homeowners.
“The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market,” said Lowe in the statement.
“The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.”
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The bank posted unaudited cash earnings for the quarter of A$1.7 billion, down 2% on the average of its prior two quarters
National Australia Bank said that higher credit impairments against business loans contributed to a small fall in its unaudited December quarter cash earnings.
NAB , which is Australia’s second-largest bank by market capitalization, on Wednesday posted unaudited cash earnings for its fiscal first quarter of 1.74 billion Australian dollars, equivalent to about US$1.11 billion.
That was down 2% on the average of its prior two fiscal quarters. NAB did not give a year-earlier comparison.
The lender said that revenue grew by 3% compared with the average of its prior two fiscal quarters. Underlying profit growth of 4% over the same period was offset by higher credit impairment charges and income tax expenses, it added.
NAB, which posted an unaudited quarterly statutory profit of A$1.70 billion, said the A$267 million credit impairment charge included A$152 million of individually assessed charges. Those were mainly against Australian businesses and unsecured retail portfolios, it said.
The individual charges were up by 54% compared with a year earlier. NAB said that it had not altered its economic assumptions and scenario weightings.
“The economic outlook is improving but cost of living and interest rate challenges persisted,” Chief Executive Andrew Irvine said. “While most customers are proving resilient, we have maintained prudent balance sheet settings.”
NAB said it had seen a small decline in net interest margin due to funding costs, lending competition and deposits, partially offset by the benefit of higher interest rates.
On Tuesday, the Reserve Bank of Australia cut the country’s cash rate for the first time since 2020 but warned against expecting subsequent near-term cuts.
NAB is still targeting full fiscal-year productivity savings of more than A$400 million, and for operating expenses to grow by less than 4.5%, Irvine said.
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