Reserve Bank reveals no real income growth until 2024, inflation targets not till 2025
The Reserve Bank’s latest quarterly statement has painted a grim picture for Aussies hoping for relief from soaring inflation rates.
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Australians will not experience any real income growth until next year, with the Reserve Bank of Australia warning inflation is still “too high” and more persistent than usual.
The latest warning from the RBA paints a grim picture for battling Aussies hoping for relief from rising prices and interest rates.
Real household income – currently standing at -3.0 per cent – will only rise by a percentage point to -2.0 in the coming month, the RBA’s latest monetary policy statement forecasts.
It will only reach 2.5 per cent by December 2024.
Inflation is also not expected to reach target levels for another two years.
“The domestic economy has proved more resilient than previously expected, and the labour market is expected to ease more gradually as a result,” the RBA’s statement says.
“In addition, the prospect of higher inflation over the year ahead increases the risk of embedding higher inflation expectations in price-setting decisions.”
It comes just days after the cash rate was raised to 4.35 per cent.
Major banks have already announced they will pass on hiked prices to their customers after the announcement.
In its monetary policy statement, the RBA says: “Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago.”
CPI inflation remains above 5 per cent – still well above the bank’s target of 2-3 per cent.
The RBA said the economy had been growing “below trend”, slowing in response to high inflation and the “cumulative increase in interest rates”.
“In particular, cost-of-living pressures have weighed on people’s real incomes and, consequently, growth in household consumption has been weak,” the RBA’s statement says.
But output growth had more “momentum” than forecasts three months ago as a result of population growth and more public and private investment.
Inflation is forecast to decline to around 3.5 per cent by the end of 2024, then stand just below 3 per cent by the end of 2025.
Global uncertainties like the El Nino weather pattern, the ongoing Hamas-Israel conflict and dire growth outlooks for China could change this, however.
The jobless rate is also forecast to grow steadily to 4.3 per cent over the next two years.
“Household consumption growth is forecast to pick up to around its pre-pandemic average by late 2024, supported by a recovery in real income growth as current headwinds fade and higher household wealth,” the RBA’s statement says.
Mortgage pain still looms for thousands of Australian homeowners, who are now feeling the pinch of the RBA’s decision to bump up the cash rate.
NAB was the first big bank to lift its standard variable home loan interest rate, increasing it by 0.25 per cent per annum.
Its base variable rate home loan is currently at 6.59 per cent per annum.
ANZ expects the change will increase monthly repayments by $70 on a variable home loan of $450,000 for an owner occupier paying principal and interest.
Both banks will bring in the changes from November 17.
Originally published as Reserve Bank reveals no real income growth until 2024, inflation targets not till 2025
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