Strong income growth has shielded households without a mortgage from the worst of the cost-of-living crunch, Reserve Bank governor Michele Bullock says.
Renters and low-income households are better off than they were two years ago despite high inflation and rapidly rising rents, as strong employment and income growth shields people from the worst of the cost-of-living crunch,
Underlying inflation, which strips out volatile prices, is tipped to have slowed to 5 per cent from 5.9 per cent annually, on the back of an anticipated 1 per cent underlying inflation in the quarter.Several economists expect elevated services inflation and a surge in petrol prices above $2 per litre will force the RBA to raise the cash rate as soon as next month, while money markets are pricing in a one-in-three chance of a November rate rise on Melbourne Cup Day.
While rents are increasing at their fastest pace in a decade due to a nationwide shortage of homes, Ms Bullock presented RBA research showing renters had actually seen their spare cash flow improve since 2021 due to higher income growth. This is due to lower income people gaining work and more hours in the hot labour market.
“The board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. “Of course, there are limits here,” she added, saying inflation expectations would shift higher if the RBA permitted inflation to remain outside its target for an extended period of time.
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