Treasurer Jim Chalmers says Australia is finally starting to make progress in its fight against inflation as homeowners brace for higher interest rates.
Borrowers will be gunning for another month of interest rate relief as the Reserve Bank readies for its next rates call on Tuesday.
The RBA paused interest rates at 4.1 percent in July after a lengthy series of hikes starting in May last year.
Dr. Chalmers said the central bank would take into account how inflation had been moderating.
“We are starting to make some welcome progress in this fight against inflation, which has been pushing up interest rates,” he told ABC Radio.
“The rate rises which are already in the system have made life harder for people, I mean, that’s self-evident.”
The treasurer said the banks had options to help people struggling to afford their mortgages.
“If there’s something that the bank can do to make it a little bit easier, they’re prepared to have that conversation with customers,” Dr Chalmers said.
Central banks around the world have been lifting interest rates to combat high inflation and are now closing in on the end of their hiking cycles.
It is again likely to be a close call between another 25 basis point hike and a second month on hold for the RBA on Tuesday, with economists and markets divided on the likely outcome.
The futures market was confident the central bank would hold fire, pricing in less than a 10 per cent chance of a rate rise.
But economists were conflicted, with a Reuters poll revealing a slender majority in favour of a rise.
Twenty of the 36 economists surveyed between July 26 and 28 expected the cash rate to rise to 4.35 per cent.
The other 16 said there would be no change.
Economists from Australia’s big four banks were also split, with two forecasting a pause and the other two tipping a hike.
The board will comb through a conflicting run of data since its members met last month.
The centrepiece of the August call, quarterly inflation numbers, critically came in below the RBA’s own predictions for June.
The consumer price index grew by six per cent annually in the June quarter, down from seven per cent through to March.
But prices are still rising much faster than the RBA’s two-to-three per cent target, and the official index revealed a few lingering sources of inflation to worry about, including rents.
Business conditions proved resilient, as did the jobs market, suggesting there is still a fair bit of heat in the economy.
The housing market has also started to rebound strongly, which could make people feel wealthy and prompt them to spend more.
However, retail sales moderated by more than expected in June, suggesting consumers are already tightening their belts and that higher interest rates are already working to cool demand.
