The Reserve Bank has revised its economic forecast, predicting inflation will remain higher for longer than previously expected.
In its latest statement on monetary policy, the RBA said inflation won’t fall under 3 per cent until the end of 2025, and will still be at 3.5 per cent in a year’s time.
“Inflation is expected to decline more gradually than previously forecast,” the RBA said.
“Inflation is forecast to decline to around 3½ per cent by the end of 2024 and to reach a little below 3 per cent at the end of 2025.”
Three months ago, the central bank had said inflation would be at 3.25 per cent at the end of next year and “back within the 2–3 per cent target range in late 2025”.
Further making things difficult for Australians, the RBA said real household income growth won’t pick up for another year.
The bank said pushing the cash rate to 4.35 per cent was needed to better ensure inflation will fall within the next few years, even though it noted “inflation expectations remain consistent with the inflation target despite the recent uptick in some measures”.
The Reserve Bank of Australia’s (RBA) latest forecasts show Australian households are unlikely to see real income growth until late 2024.
The RBA said the Australian economy had been more resilient than expected, meaning inflation was likely to be more persistent through the coming year.
Its projections also incorporated further increases in interest rates, signalling the bank may raise the cash rate higher than 4.35 per cent a 12-year record.
Australia’s gross domestic product expanded by 2.1 per cent in the last financial year, compared with an expectation of about 1.5 per cent growth.
Household income fell by 3 per cent, with predictions it would fall again by another 2 per cent before expanding by 2.5 per cent in the second half of 2024.
