Australians are being told to brace for fresh economic pain with the Reserve Bank governor flagging further rises in interest rates to combat inflation.
In a speech last night, Philip Lowe said workers shouldn't expect a pay rise as wages struggle to keep up with an inflation rate heading above 7 percent.
He said if workers anticipate pay rises in line with inflation it's going to create bigger problems for the economy.
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Lowe is concerned about the potential for a hike in the rate of wages as workers demand more money to deal with a cost-of-living crisis.
He also said the effects of climate change and a transition to renewable energy are also likely to push prices up and make them more volatile.
With less supply of energy going into the market, it means there is less to go around.
That results in the price going up, posing a difficult transition for Australia in the short term.
The Reserve Bank is forecast to raise interest rates to a 10-year high of 3.1 per cent at its December meeting in a bid to curb prices.
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Inflation is expected to reach 8 per cent by the end of 2022.
Lowe was speaking before the OECD released its global outlook which pointed to a recession in the US and much of Europe.
The think tank said the Ukraine war continued to rock the international economy and global growth was slowing down.