Opposition Leader Peter Dutton has cautioned that inflation pressures could reemerge if the Reserve Bank of Australia (RBA) reduces rates prematurely. This warning comes amid concerns that the north Queensland floods might drive up grocery prices. The floods have affected banana and sugar supplies, potentially impacting prices minimally. Treasury estimates indicate up to 20% of Australia's banana crop could be impacted due to supply chain disruptions.
Treasurer Jim Chalmers noted, "We know that the flood-affected region accounts for about four per cent of agricultural production in Australia." He added that while bananas and sugar might see narrow impacts, the overall inflation effect is expected to be minor.
The RBA board is unlikely to be heavily influenced by this, with markets predicting a high probability of a rate cut. Dutton emphasized respecting RBA governor Michele Bullock's independence, stating, "But that's a decision for the Reserve Bank governor, and she shouldn't feel pressured one way or the other."
Economic assessments from the Treasury suggest the floods could lead to a 0.1% reduction in March-quarter GDP. Chalmers remarked on the potential for a rebound in subsequent quarters due to rebuilding efforts.
Australia's economy saw a 0.3% growth in the September quarter and 0.8% over the year, marking the lowest annual growth in decades. Chalmers committed to aiding flood-hit communities.
Consumer sentiment slightly increased, with optimism about rate cuts. Business confidence rose, despite softer conditions, according to NAB economists.
Source: Western Advocate