The Central Bank of Australia has decided to raise the interest rate for the first time in 11 years Business news

Author: ROD McGUIRK, Associated Press

CANBERRA, Australia (AP) – The Australian central bank raised its benchmark interest rate for the first time in more than 11 years on Tuesday. The monetary rate has risen from 0.1% to 0.35% in a move that could hurt the government, which will run for re-election on 21 May.

The increase was expected after official data released last week showed that Australian inflation had risen to 5.1% in the year to March. This is the highest annual rate since 2001, when the newly introduced 10% federal consumption tax led to a temporary increase.

Inflation was sharply higher in the last quarter of March than 3.5% three months earlier. The March result was due to rising fuel and housing costs and food shortages caused by the recent Australian floods.

The Reserve Bank of Australia is adjusting interest rates to keep inflation in the target range of 2-3%. Bank Governor Philip Lowe said inflation rose more than expected but remained lower than in most developed economies.

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“The economy has proven resilient and inflation has risen faster and to a higher level than expected,” Lowe said in a statement.

“There is also evidence that wage growth is rising. Given this and the very low level of interest rates, it is appropriate to start the process of normalizing the monetary situation, “Lowe added.

The monetary rate has been at a record low of 0.1% since November 2020.

In November, Lowe said the rate could remain so low until 2024, despite inflation caused by the pandemic.

The bank last raised interest rates in November 2010. The currency then rose by a quarter of a percentage point to 4.75%.

This is the first time that the bank, whose government independence was legally enshrined in 1996, has changed interest rates during the federal election campaign since 2007.

Two weeks after the reference rate rose 0.25 percentage points to 6.75% in November 2007, the Conservative government of Prime Minister John Howard was voted on after more than 11 years in power.

The Conservative government of Prime Minister Scott Morrison is running for a rare fourth three-year term in the May 21 election.

According to the Australian Bureau of Statistics, residential property prices in Australia rose 24 percent last year. Due to rising housing costs, Australians are one of the most indebted populations in the world and ill-prepared to raise money costs.

Opposition Treasury spokesman Jim Chalmers described the rate hike as a “complete cost of living crisis, accompanied by Scott Morrison.”

“Scott Morrison’s economic credibility has already been curtailed and is now completely destroyed,” Chalmers told reporters.

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