Reserve Bank of Australia expects high inflation until June 2025
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The Reserve Bank reveals for the first time when the pain of inflation for Australians will end
- Reserve Bank forecasts high inflation until 2025
- That’s when you see the 2 to 3 percent target come back.
The Reserve Bank has revealed that it expects Australia’s inflation pain to continue until mid-2025.
Headline inflation was expected to return to the top of its 2% to 3% target in June 2025, with the new forecasts contained in the RBA’s monetary policy statement released on Friday.
Inflation in 2022 rose 7.8 percent, the steepest pace since 1990, and has not been within the target range since the September 2021 quarter when Sydney and Melbourne were still in lockdown.
But the RBA believes the worst is over because global supply chain constraints are being worked out.
“Inflation is likely to have peaked at the end of 2022 and is projected to return to the target range in the coming years,” he said.
The Reserve Bank has revealed it expects Australia’s inflation pain to continue until mid-2025 (Governor Philip Lowe pictured outside his Randwick home in Sydney this week)
“The easing in global price pressures already underway is expected to feed through to domestic prices over time.”
A moderation in price pressures is also expected to coincide with more job seekers, with the RBA expecting unemployment to hit 4.5 percent by mid-2025, a level significantly higher than the current low of 48 years of 3.5 percent.
“In addition, slower domestic demand growth and a moderation in labor market conditions are expected to reduce domestic inflationary pressures,” the RBA said.
Wage growth was expected to rise by the end of 2023 to a new 15-year high of 4.25 percent, after nine years of stagnant wage levels below the long-term average of 3 percent.
Unlike Treasurer Jim Chalmers, RBA Gov. Philip Lowe worries that wages are driving up inflation.
The RBA this week raised interest rates for the ninth straight month to a new 10-year high of 3.35 percent.