The RBA decided to maintain the cash rate at 4.10% and the interest rate paid on Exchange Settlement balances at 4.00%.
Over the past year, interest rates have increased by 4 percentage points to balance supply and demand in the economy. Given the uncertainty in the economic outlook, the Board opted to keep interest rates steady for now. This decision allows them time to assess the impact of previous rate increases and monitor economic conditions.
Inflation in Australia remains high at 6%, mainly driven by rising service prices, while goods price inflation has eased. The central forecast indicates a decline in CPI inflation to around 3.25% by the end of 2024, gradually returning to the 2 to 3% target range by late 2025.
The Australian economy is experiencing below-trend growth, and household consumption and dwelling investment are weak. The central forecast predicts GDP growth of about 1.75% in 2024 and a little above 2% in the following year.
Though the labour market is still tight, job vacancies have decreased slightly, leading to a gradual rise in the unemployment rate from 3.5% to around 4.5% next year. Wages have increased in response to the tight labour market and high inflation, aligning with the inflation target if productivity growth improves.
As always, the Board’s primary priority is to return inflation to target within a reasonable timeframe, as high inflation negatively affects savings, household budgets, business planning, and income equality. Medium-term inflation expectations have been consistent with the target. Still, uncertainties remain, such as persistent services price inflation and uncertainties in the operation of monetary policy and firms’ pricing decisions.
To achieve its inflation target, the Board may consider further tightening monetary policy based on data and risk assessment. To achieve its objective, the Board will closely monitor global economic developments, household spending trends, and inflation and labor market outlooks.
