“The sharp fall in consumer price inflation for the December quarter is both good news and a warning,” Innes Willox, Chief Executive of the national employer association Ai Group said today.
“The good news is that a return of inflation to the target range is much closer than previously thought. Inflation fell more decisively in the December quarter than the Reserve Bank expected. There is now next to no chance that the RBA Board will increase rates at their meeting next week.
“The warning arising from today’s announcement is that the economy may be slowing too rapidly and we may be looking at a hard rather than a soft landing. The November increase in interest rates is yet to fully flow through and further dampening impacts may tip the economy into reverse.
“Recent business surveys and a sharp drop in retail sales in December underline the possibility of a hard landing.
“A key to avoiding a hard landing is for the pace of wage increases to also moderate. The current pace of wage increases is clearly not supported by productivity improvements and Australia’s unit labour costs have surged to the detriment of our competitiveness. This is not sustainable and puts at risk investment and further employment growth and calls into question the ability to hold onto the very strong inroads that have been made into unemployment and underemployment since the pandemic,” Mr Willox said.
