Federal and state governments have been put on notice by the Reserve Bank that soaring population growth and pay rises for low-income public sector workers may lead to further interest rate rises despite growing evidence that more households are in financial pain.
The minutes show the decision to pause, which was widely expected by financial markets, followed a debate by RBA board members over the merits of a further quarter percentage point rate rise. “Members noted that this could put significant pressure on Australia’s existing capital stock, especially housing, which would in turn manifest in higher consumer prices,” the minutes showed.“Although higher immigration might reduce wage pressures in industries that had been experiencing significant labour shortages, members noted that the net effect of a sudden surge in population growth could be somewhat inflationary for a period.
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