RBA Aims to Keep Australians Worried About Inflation

The Reserve Bank of Australia (RBA) is aiming to keep Australians worried about inflation, in order to cut their spending and prevent further rate hikes. Despite inflation falling to levels last seen before the Iran war pushed up crude oil prices, the RBA's chief economist, Sarah Hunter, is concerned that consumers will expect high inflation to continue, leading to higher prices.

Inflation has been above the RBA's 2-3 per cent target for almost a year, but raising interest rates again would 'crush an already weak economy' and squeeze home building activity during a housing crisis. The RBA is struggling with a classic economic Catch 22, as higher crude oil prices make it difficult to raise interest rates again.

Headline inflation could climb again due to the Prime Minister's decision not to extend fuel tax cuts beyond August 2. Dr Hunter expressed concern that consumers will expect high inflation and potentially lead to higher prices for longer if they don't cut their spending in anticipation of another rate hike.