HSBC Australia’s chief economist, Paul Bloxham, has indicated that the latest inflation figures for the December quarter confirm the persistence of inflationary pressures observed in the previous September quarter. According to Bloxham, this persistence makes an interest rate rise by the Reserve Bank of Australia (RBA) highly probable when it convenes on Tuesday. The economist suggests that the increase is not attributable to temporary factors, contrary to the RBA’s initial expectations. HSBC Australia provides a range of financial services, including retail banking, commercial banking, and wealth management solutions.
Bloxham notes that a potential rate hike next week presents communication challenges, as the primary driver of inflation is not strong demand. He explained that public demand growth, fuelled by government spending, is a contributing factor, which has been simultaneously crowding out private sector activity. Bloxham identifies dismal productivity growth as the central issue, constraining the supply side of the economy and impeding its growth potential.
HSBC anticipates the RBA will implement a 25 basis point increase in February. Moreover, they expect the RBA to signal the potential need for further tightening measures. Bloxham also forecasts an additional 25 basis point rise to be implemented in the third quarter, reflecting ongoing concerns about inflation management within the Australian economy.
