Australia's central bank chief stepped up a warning of more rate hikes ahead to temper rising price pressures, even as risk of a steep economic downturn heightens with data showing GDP expanded at its weakest pace in one-and-a-half years last quarter
Reserve Bank of Australia Governor Philip Lowe said the assessment of inflation risks has changed in the past few months since it paused a months-long policy tightening campaign in April, including upside surprises on wages, housing prices and persistently high services inflation.
The RBA has projected headline inflation - which is at about 7% now - to return to the top of the bank's target of 2%-3% by mid-2025, a slower path than many other economies as Lowe wants to preserve strong gains in the labour market. Markets now see rates are almost certain to reach 4.35% by September, and a hike could come as soon as next month.In the last quarter, for instance, GDP growth was underpinned by business investment, which analysts expect to slow from here. Also, Australian consumers, squeezed by high costs of living and rising interest rates, have cut back on discretionary spending, making just a 0.1 percentage points contribution to first quarter GDP growth.
A productivity measure showed GDP per hour worked fell 0.3%, while compensation of employees , the broadest measure of economy-wide labour costs, increased 2.4% in the first quarter, after a rise of 2.0%.
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