‘Hurts everyone’: RBA’s rate rise warning

The RBA announced on Tuesday its decision to hold the official cash rate at 4.35 per cent, giving some reprieve to mortgage holders.

But it could be short-lived if the gap between aggregate demand and aggregate supply is not closed, Ms Bullock said in a speech on Thursday, repeating that the RBA’s board did not expect inflation to return to the 2-3 per cent target band until December 2025.

“On balance, the board decided to keep interest rates on hold, judging that such an outcome would still meet the board’s mandate to balance its inflation and employment objectives,” she said.

“But the board remains vigilant with respect to upside risks on inflation and will not hesitate

to raise rates if it needs to.

“I know this is not what people want to hear, but the alternative of persistently high inflation is worse. It hurts everyone.”

Speaking from Armidale in NSW’s Northern Tablelands, Ms Bullock said she knew that the rising cost of living was being felt “acutely” in regional parts of Australia.

She said housing prices had cumulatively grown more in regional Australia than the big cities since the start of the Covid pandemic.

Singling out Armidale, she said housing prices had surged by some 40 per cent, with average rents up by nearly 25 per cent.

“More generally, though, we know that the strain on household finances from high housing costs is being felt acutely in our regional areas as well as our cities and could continue for some time if construction activity remains low,” she said.