The Australian Council of Trade Unions (ACTU) has sharply criticized the Reserve Bank of Australia’s recent decision to raise interest rates, with new ACTU secretary Melissa Donnelly warning the central bank is “racing towards a cliff” and placing undue burdens on workers. The RBA’s move, intended to curb inflation, was described by Donnelly as unfairly punishing Australian workers for global events beyond their control, including conflicts and supply pressures.

The ACTU’s comments come after the RBA increased interest rates to their highest level in 15 years, marking the fourth hike this year. Donnelly highlighted the financial strain this puts on mortgage holders, estimating an additional $110 monthly cost for the average loan of $731,000, and about $460 per month cumulatively for this year’s rate rises. She warned the rate hike risks higher unemployment and reduced working hours, reversing progress on full employment.

“Our current inflation challenges come from Donald Trump’s war [Middle East conflict], and higher interest rates will not change that one bit,” Donnelly said, referencing geopolitical factors driving inflation rather than domestic economics. She accused the RBA of abandoning its dual mandate of controlling inflation while supporting employment. “The 723,000 Australians currently out of work will face a harder time finding a job,” she added.

The Australian Services Union national secretary, Emeline Gaske, similarly condemned the RBA’s policy as “heartlessness in the extreme,” describing the rate increases as a “wrecking ball to the economy” that will exacerbate cost-of-living pressures already intensified by “price gouging” from major supermarkets.

Employers acknowledged the difficult position of the RBA but expressed concern over the potential consequences of higher borrowing costs. Australian Chamber of Commerce and Industry chief executive Andrew McKellar noted that rising energy and fuel costs, alongside increased taxes, regulatory burdens, and government spending, have contributed to challenging economic conditions. He emphasized that limited productivity growth has constrained economic potential, forcing the RBA’s hand despite sluggish economic growth.

“It’s astonishing the RBA is raising interest rates when the last national accounts have the economy growing at zero per cent per capita, but that is an indication of how bad the productivity situation is,” McKellar said. “We are hitting our economic speed limit in second gear.”

Innes Willox, chief executive of the Australian Industry Group, also indicated that the RBA had limited options in the face of inflation running “far too hot” due to a prolonged absence of meaningful productivity gains, affirming the rate hike as a necessary but challenging measure.

The debate highlights tensions between efforts to control inflation and concerns over the impact on employment and business viability amidst ongoing global and domestic economic pressures.