Today’s decision by the Reserve Bank to raise the cash rate and to reinforce its position that further rises may be necessary is the clearest possible warning about the intensifying seriousness of Australia’s persistent inflation, Innes Willox, Chief Executive of the national employer association, Ai Group, said today.
“Expectations of inflation becoming embedded in further price and wage setting present a major risk to households and businesses alike,” Mr Willox said.
“This latest increase in interest rates is set to put pressure on disposable incomes, consumer spending, business investment and employment.
“The likelihood of the current downswing turning into a recession is shortening by the month with the potential for a blowout of unemployment and underemployment now well and truly on the cards.
“Wage pressures are growing and we are now at the point where current momentum will see further price pressures unless our stagnant productivity performance can be reignited.
“It is very difficult to identify how this will occur.
“It is critical that last week’s very high increase in award wages does not set the pace for broader wage negotiations.
“It is particularly critical that it does not get reflected across the terms of multi-year employment agreements,” Mr Willox said.
