This morning (Tuesday, 5th July) Australia’s central bank raised interest rates for the third consecutive month and indicated that more rate rises are to come as it battles to control surging inflation.
The latest increase pushed the rate up by 50 basis points to 1.35%, marking a cumulative increase of 125 basis points since May – the fastest fluctuation in rates since 1994.
Responding to the rise in interest rates Master Builders Australia’s CEO Denita Wawn said: “The Reserve Bank’s decision to further increase interest rates is more evidence of the need for monetary policy to return to more normalised settings to combat inflation.”
“However, while acknowledging the need to tackle the dire effects of inflation, we are concerned that a continuing regime of steep rate rises risks turning the economic dial too far in the opposition direction and stalling economic growth needed to for the continuing recovery from Covid,” she said.
“Time should be given to observe the impact of the monetary policy changes in the economy.”
Wawn said that Australia’s construction industry has been largely responsible for underpinning the country’s recovery from the economic effects of the pandemic and that any suppression of construction activity would adversely affect the country's economy.
“Our industry is disproportionately affected by interest rises and a hard economic landing would put at risk the viability of many building and construction businesses who have managed to come through the pandemic but whose resilience has been eroded by severe supply chain pressures. Many now lack the resilience to withstand more sharp economic shocks,” she said.
“Today’s decision reinforces the need for the federal government to ensure that its fiscal policies – indeed all economic levers – must be tested against their ability to drive down inflation and increase productivity,” added Wawn.
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