Treasurer Jim Chalmers has pointed to the spiralling conflict in the Middle East after the Reserve Bank of Australia hiked the official cash rate 25 basis points to 4.1 per cent.
The RBA’s decision on Tuesday was close, with the board splitting 5-4.
Fronting a post-hike press conference on Tuesday, Mr Chalmers said the bank’s decision “reflects the uncertainty that we’re seeing in the global economy”.
“It’s not a surprising decision, but that doesn’t make it any easier for millions of Australians with a mortgage,” he told reporters at Parliament House.
“We’ve got an inflation challenge in our economy already and developments in the Middle East are making that worse.
“The impacts of what we’re seeing in that part of the world are already substantial, but we don’t know yet how enduring those very substantial economic pressures will be.
“It depends very heavily on how long the conflict in the Middle East continues for at a time of great uncertainty. This will put additional pressure on people.”
Most economists were leaning toward a rate rise before the US and Israel launched strikes on Iran late last month.
Reacting to the hike, BDO chief economist Anders Magnusson echoed Mr Chalmers’ concerns, saying climbing oil prices posed an “immediate challenge for the RBA”.
“Higher oil prices feed directly into inflation through fuel costs and indirectly through higher transport and supply‑chain costs across the economy,” Mr Magnusson said.
“The oil situation is fundamentally a supply‑side shock, and that matters for monetary policy.”
However, shadow treasurer Tim Wilson said the decision was based on December data and driven by Labor pouring “pouring debt petrol on the inflation fire”.
“The Treasurer will blame international factors, but Australia’s inflation problem was reported in the December data from Canberra, not March in Tehran,” he said in a statement.
“Jim Chalmers’ job was to put out the inflation fire, by keeping it alight it means Australia will be doubly hurt.
“Australians are living the consequences of the Treasurer’s inflation denial.
“When Australians pay their mortgage or go to the supermarket, they feel the consequences of Jim Chalmers’ active inflation agenda whether he acknowledges it or not.”
