Australia’s central bank expected to hold rates steady at 4.35%

HIGH COST OF LIVING

Australians say they are facing increasing financial stress, and grappling with a higher cost of living as food and fuel prices soar.

Nowhere are the struggles on the ground as clearly reflected as at the Loaves and Fishes community kitchen, which has been feeding Sydney’s poor and homeless for the past four decades.

Last year, the charity provided a staggering half a million free meals. Still, the demand keeps growing, said Reverend Bill Crews, who founded and runs the charity.

“The need has increased fourfold. We’re getting people who we never saw before. People who just don’t earn enough money to pay the rent or their medical bills,” he said.

Aside from food, soup kitchen also provides social welfare and support.

One resident who depends on the non-profit said: “(This place) is very important because it helps me financially and emotionally. I have a lot of friends who support me here as well.”

Crews said the charity is not expecting a fall in demand for its services anytime soon, describing the economic situation for regular Australians as “dire”.

“I don’t see things getting much better for the next four or five years. We’re a really good barometer of how the economy is,” he said.

GOVERNMENT UNDER PRESSURE

In parliament, the government is under pressure from the opposition which accuses it of mishandling the economy.

However, Australia Prime Minister Anthony Albanese has hit back at the Liberal Party, saying rates started rising on their watch, with the highest inflation quarter in March 2022, before his Labor Party came into power.

There are also concerns about a recession.

“The risk of a recession in Australia is high. This is something the Reserve Bank has to allow for because if we tip over into a recession, then that would probably knock the inflation numbers way down below their target of 2 to 3 per cent,” said Oliver, the economist. 

The key drivers of inflation such as housing, utilities and rent, as well as everyday food costs, continue to rise. 

Most economists expect the central bank to leave rates unchanged through 2024, but some predict a cut before the end of this year.

Personal income tax cuts are beginning to flow through and a cut in interest rates would certainly ease the pressure on homeowners with a large mortgage.

The central bank’s decision on rates as well as the latest CPI figures – also set to be released on the same day – will be closely watched.

This comes as the general election looms – the government needs to call a poll by May next year – and the Albanese administration’s popularity could well be tied to these numbers.