The Business Council of Australia said today’s decision by the Reserve Bank of Australia to lift the cash rate by 0.25 per cent to 3.85 per cent means there must be a renewed focus on lifting productivity and disciplined government spending.
Business Council Chief Executive Bran Black said the decision reinforced the urgent need to reduce inflation pressures across the economy.
“Today’s rate rise is a clear reminder that inflationary pressures are still with us and that the job of getting it under control isn’t finished,” Mr Black said.
“That’s why the upcoming Budget must focus on disciplined spending and put new fiscal rules in place to ensure spending does not keep increasing as is currently forecast.”
“A cap on real spending growth of 2 per cent a year can help to keep a check on spending while still providing flexibility to accommodate decisions about spending per person after inflation.”
Mr Black said the decision highlighted the need for a broader economic response, with the Reserve Bank revising down the outlook for both productivity and real wages growth.
“If we can lift productivity and unlock private sector investment, we can sustainably grow wages and improve living standards without adding to inflation,” Mr Black said.
The Business Council will continue to work with governments and industry to support policies that lift productivity, strengthen competitiveness and support living standards.