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Minimum Wage Rise May Trigger Triple Rate Hike

The 5.2 per cent minimum wage increase is expected to trigger an accelerated Reserve Bank interest rate rise cycle, according to economists.

The Fair Work Commission lifted the minimum wage yesterday by 5.2 per cent, and the award wage by 4.6 per cent, the largest increase in 16 years.

RBC Capital economist Su-Lin Ong said the rise would “further ramp up pressure on the RBA to normalise rates quickly to contain rapidly rising inflationary expectations”

“We now think it likely the RBA will take rates above the 2.1 per cent terminal level we had previously been expecting to be reached by October,” Ong said.

Deutsche Bank chief economist Phil Odonaghoe said a triple rate hike is now possible, marking the first since 1994. This would mirror the rate rise since in the US this morning.

RBA governor Philip Lowe told 7:30 on Tuesday evening that 7 per cent inflation is expected.

“We’ll do what’s necessary to get inflation back to 2-3 per cent,” he said.

“I think by the end of the year inflation will get too close to 7 per cent, and we need to chart a course to bring it back down.”



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