5 Aug 2021

Reserve Bank should hold off on raising interest rates - Eaqub

From Morning Report, 7:37 am on 5 August 2021

Economist Shamubeel Eaqub is urging the Reserve Bank to hold off hiking up interest rates. 

Stronger than expected labour market data has confirmed inflation pressures are building with an increase in wages, a rapid drop in unemployment, and more people in work.

Official data shows the jobless rate in the June quarter fell to 4 percent, from 4.7 percent in the previous quarter.

Some experts are calling on increasing the Official Cash Rate, but Shamubeel Eaqub told Morning Report he disagrees.

"I just feel like it's a very arrogant way to think about managing the economy," he said.

Yes, we have a big housing boom, yes, we have a complete shortage or a supply shock in terms of the labor market, because the borders are closed, it doesn't mean the economy is in amazing shape, and that things are overheating.

"I would say things are, sort of, just back to the trend that we had pre-Covid. It's not like we're in 2007/2008 period we had before the Global Financial Crisis when the economy was running so hot that we simply couldn't keep up."