Today the Reserve Bank of Australia (RBA) increased official interest rate by 0.25% to 3.1%.

This is the eighth increase in a row.  The last time Australia had an interest rate above 3% was back in October 2012.

The RBA Governor noted inflation was remaining persistently high at 6.9% despite the consecutive rate rises. Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role.

He also warned more rate hikes are possibly in store for borrowers, pending data on inflation as the RBA’s priority is to re-establish low inflation and return inflation to the 2–3 per cent range over time.

A further increase in inflation is expected over the months ahead, with inflation forecast to peak at around 8 per cent over the year to the December quarter.

The labour market remains very tight, with many firms having difficulty hiring workers. The unemployment rate declined to 3.4 per cent in October, the lowest rate since 1974. Wages growth is continuing to pick up from the low rates of recent years and a further pick-up is expected due to the tight labour market and higher inflation.

If you have questions in relation to the above, or any other matters, please do not hesitate to contact our office on 1300 620 345.