Australia’s central bank yesterday hiked interest rates to a near eight-year high as it joined others in trying to bring down sky-high inflation and said further increases that would hit families’ pockets were likely.
The Reserve Bank of Australia lifted borrowing costs 50 basis points to 2.35 percent, the highest since the start of 2015.
The path to bring prices back into balance was a “narrow one and clouded in uncertainty, not least because of global developments,” the bank said in a statement.
Photo: Brendon Thorne, Bloomberg
It added that while the hike would “help bring inflation back to target,” more rises were expected in the coming months.
“Inflation in Australia is the highest it has been since the early 1990s and is expected to increase further over the months ahead,” the policy board said.
The central bank estimates inflation would peak at 7.75 percent this year, before dropping to 4 percent next year.
Federal Treasurer Jim Chalmers said the rate hike would be “very difficult news for a lot of Australians with a mortgage.”
“The fact we knew it was coming doesn’t make it any easier for people. This is tough,” he said. “This will tighten the screws on family budgets.”
Separately, Australian farmers are expected to earn a record amount from agriculture exports this financial year, the country’s chief commodity forecaster said, as it raised its estimate on the back of favorable weather and high global prices.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said farm export earnings could total a record A$70.3 billion (US$48 billion) for 2022-2023. That is up about 8 percent from its previous forecast in June.
Australia’s east coast has been dominated by La Nina, typically associated with increased rainfall, over the past two years. While triggering flooding in several places, the weather pattern has also brought good rains across the eastern wheat belt.
ABARES has forecast wheat production of 32.2 million tonnes and 6.6 million tonnes for canola, just shy of their records hit last year. Barley production is expected to total 12.3 million tonnes, the fourth-largest on record.
“Winter crop prospects in Australia are looking very promising at the beginning of spring — we’re forecasting a 55.5 million tonne harvest,” ABARES executive director Jared Greenville said in a statement.
Planting of summer crops is forecast to be well above average for the current season supported by suitable soil moisture and more land previously left fallow during winter.
Although favorable seasonal conditions are expected to persist, soaring global inflation, a sluggish Chinese economy, and rising costs of fertilizers and farm equipment could take some shine off a bumper harvest, Greenville said.
Additional reporting by Reuters
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