(19 May 2023 – Australia) The Reserve Bank of Australia (RBA) may be forced to continue raising the cash rate as a direct result of booming West Australian (WA) business growth according to NAB’s Business Banking Head.
With a dominant export slant, the WA economy is underpinned by resurgent iron ore and natural gas demand in conjunction with rising prices for agricultural goods and commodities such as lithium, copper and gold. The result is an after glow” effect on enterprises linked to mining and primary resources according to NAB Group Executive, Business & Private Bank, Andrew Irvine in an interview with James Eyers for the AFR.
“There is concern that if the economy is too healthy, inflation is going to be more persistent and interest rates will have to go higher than we want them to go, to have more impact. That is the challenge” Mr Irvine said.
“But on the other side of the ledger, confidence has fallen materially, particularly on the eastern seaboard. People are worried about the future, and they are worried about how high interest rates will go, and they are worried about consumers pulling back particularly discretionary spending. First people will protect their house and make their repayments, and pull their paws in elsewhere, like going out and spending discretionary money.
“That is only just emerging, but the likelihood is that it will continue over the coming months, especially as more consumers come off fixed rate mortgages to floating rate mortgages on much higher rates. But my expectation is spending will move away from hospitality and restaurants to groceries, and grocery spending shift from high-priced branded goods to private label goods as people make those types of choices.”