Powered by MOMENTUM MEDIA
accountants daily logo

RBA presses pause button in ‘uncertain’ economy

Business

The outlook remains clouded by services prices, household consumption a tight labour market and slower growth.

By Philip King 9 minute read

The RBA has left rates on hold at 4.10 per cent as it assesses the impact of its previous rises in the uncertain economic outlook.

“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so,” the RBA statement said.

“In light of this and the uncertainty surrounding the economic outlook, the board again decided to hold interest rates steady this month. This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook.”

It said inflation had passed its peak with the July CPI figure showing a further decline although “inflation is still too high and will remain so for some time yet” with the cost of services “rising briskly” and rent inflation “elevated”.

It expected inflation to keep falling and to be back within the 2–3 per cent target range in late 2025.

“The recent data are consistent with inflation returning to the 2–3 per cent target range over the forecast horizon and with output and employment continuing to grow,” it said. “Inflation is coming down, the labour market remains strong and the economy is operating at a high level of capacity utilisation, although growth has slowed.”

“There are significant uncertainties around the outlook. Services price inflation has been surprisingly persistent overseas and the same could occur in Australia. “There are also uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages respond to the slower growth in the economy at a time when the labour market remains tight.

“The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income.

“And globally, there is increased uncertainty around the outlook for the Chinese economy due to ongoing stresses in the property market.”

It said further tightening of monetary policy “may be required to ensure that inflation returns to target in a reasonable timeframe”.

 

You need to be a member to post comments. Become a member for free today!
Philip King

Philip King

AUTHOR

Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

You can email Philip on: This email address is being protected from spambots. You need JavaScript enabled to view it.

You are not authorised to post comments.

Comments will undergo moderation before they get published.