MNI BRIEF: RBA Minutes show 25bps, 50bps debated in Sept

The Reserve Bank of Australia considered a 25bps hike at its Sept 6 meeting before policymakers backed a bigger, 50bp increase in the Official Cash Rate on concerns about the "potential damage" from high inflation, according to Board minutes released on Tuesday.

The minutes underscored the Bank's signalling that it may soon slow its pace of tightening, noting it was "resolute" in the need to return inflation to target but mindful it "needed to account" for risks to growth and employment. Leading economists expect another 50bps hike to 2.85% on Oct 4.

The Board reiterated concerns about the tight jobs market, with labour demand seen as "robust" and wages growth picking up "as expected". The strong jobs market and income growth were viewed as providing an "important counterbalance" for household budgets facing inflation and higher interest rates.

The decline in housing prices was assessed to have "broadened out" to most capital cities. Mortgage interest payments were expected to increase to around 4.5% of household disposable income over the coming months, and to almost 5% by the end of the year.

The Bank, which will release a review of its bond purchase program on Wednesday, said in the minutes it would consider using a BPP again only in "extreme circumstances". Deputy Governor Michele Bullock will present a speech entitled "Review of the Bond Purchase Program" on Wednesday. An initial assessment in June estimated the BPP lowered bond yields by 30bps.