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Economics update | 10 February, 2023
09 Feb 2023
RBA raises interest rates by 25 basis points
The Reserve Bank increased interest rates by 25 basis points to 3.35 per cent. This is the ninth increase to the cash rate since May 2022 and the highest it has been since September 2012.
With the monthly CPI indicator rising 8.4 per cent in the year to December, this decision comes with warnings that further increases in interest rates will be needed to ensure high inflation remains temporary and CPI returns to the target 2-3 per cent range.
While it is not clear that inflation has peaked, there is evidence inflationary pressure should ease over coming months. The RBA in their November 2022 Statement on Monetary Policy is expecting a decline to 6.3 per cent in June 2023 and 4.2 per cent in June 2024.
National Reconstruction Fund
This week, ACCI made a submission to the Senate Standing Committee on Economics review of the National Reconstruction Fund Corporation Bill 2022. In the submission we highlighted our support for $15 billion in investments to target diversity and growth in Australian industry. However, amongst other recommendations, we advocated the need for the NRF to remain a fully independent statutory corporation, free from direct or indirect government influence, and explicitly required to undertake rigorous cost-benefit analysis when assessing investment decisions.
Gas Market Code of Conduct
ACCI also made a submission to the Treasury on the Gas Market Code of Conduct. In the submission, we advocated against the proposed mandatory code of conduct in the gas market and the government-proposed “reasonable price” due to its deterrence on vital investment in the industry. Instead, a voluntary code of conduct should remain in place and more comprehensive long-term strategies need to be developed to increase domestic supply, competition, and efficiency of the gas market. ACCI recommended the development of a national gas strategy and an energy roadmap.
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