A Deloitte Access Economics report said that the Reserve Bank of Australia (RBA) would increase interest rates three times over the coming year. This will be in response to rising wages that go along with the mining boom that will help lift the economy out of the slump that it went into following natural disasters.
Mineral resource prices are high and the demand for the Australian minerals is consistent and strong. The Business Outlook report released in Canberra said that this would lead to shortage of workers and will increase wages.The report added that this would boil down to a strong demand-weak supply scenario of the kind that makes central bankers sweat.
Glenn Stevens , the Reserve Bank of Australia Governor, has not changed the official cash rate since 2010 November. With floods causing a loss of 5,400 jobs between April and June that was the weakest quarter since 2001 for the Australian economy. As it is at 4.75 % the rate is the highest in the world’s developed economies.
Deloitte Access Economics said that the two speed economy pressures on the industrial landscape are intensifying. It added that many families are doing it tough and the likes of the retailers would hurt like hell if rates rose further. As per the report poor productivity gains have left the cost of workers rising at the fastest rate for two decades, while growing demand will allow more businesses to pass on price rises.