- The RBA left the cash rate unchanged as was widely expected following interest rate rises at each of the first three meetings this year.
- Today’s ‘no change’ was signalled last month, with previous increases creating space for the Board to assess the response of the economy and inflation to previous interest rate rises and the oil supply disruption.
- The text of the statement reads a little hawkishly to me, with the Bank noting signs that some firms experiencing cost pressures are increasing the prices of their goods and services and others are looking to do so. This will keep inflation elevated in the short term, though I am generally more optimistic than the RBA that the peace deal will see oil prices and other related commodities normalise and fuel surcharging reduce over coming months.
- The decision also reinforces that the Board remains focused on ensuring that inflation does not become embedded once the impulse from higher oil prices has passed through. This suggests that there is little chance of any early reduction in interest rates, with the recent Fair Work Commission 4.75% minimum wage rise an unwelcome and unhelpful decision that will add unnecessarily to inflation and business costs.
- The Governor’s press conference will no doubt contain a great deal of questioning about the housing market. The housing slowdown will be helpful in slowing the economy – something the RBA’s statement also acknowledges and seeks – and suggests monetary policy can remain on hold for a few more months at least.
- My base case remains of a long, slow tightening cycle as normalised oil prices allow better economic conditions to re-establish, and inflationary pressures from the global AI boom impact on technology, copper, electricity and water prices, among others.
Chief Economist
Interest Rates
Chief Economist
Ivan joined CreditorWatch as Chief Economist in October 2024. He is a highly experienced chief economist and keynote speaker on the economy and financial markets.
Most recently, Ivan was Chief Economist, Corporate & Institutional Banking for National Australia Bank, but has also been Chief Economist for Qantas and Chief Economist (Australia) for ANZ and Deutsche Bank. Ivan has also consulted to SEEK, IATA and Virgin Australia.
Ivan holds a Bachelor of Economics with Honours from the University of Tasmania and commenced his career at the Reserve Bank of Australia.
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