RBA: Another Hawkish Hold, Board Remains “Vigilant” To Upside Inflation Risks

The RBA left rates at 4.35% in November as was unanimously expected. The tone of the statement and guidance paragraphs was little changed and suggested another hawkish hold. The Board remains “vigilant to upside risks to inflation” and didn’t rule “anything in or out”. It is still going to be “some time yet before inflation is sustainably in the target range”. Thus, Governor Bullock will probably reiterate at the 1530 AEST press conference that rate cuts are unlikely in the “near term”.

• The statement was updated for the new data released since the last meeting on September 24. This included a couple of mildly hawkish additions – that some labour market indicators had “recently stabilised” and there is “tentative evidence of an increase in spending” in Q3 as income growth rises.
• The RBA notes that the November forecasts are “very similar” to August’s. The revisions to the trimmed mean profile were only by 0.1pp, but it meant that it should be at the top of the 2-3% band in Q2 2025 rather than Q4 but the mid-point will still be Q4 2026, which is what the RBA highlights in the statement.
• Despite recent revisions, demand continues to exceed supply. Growth was revised down across the forecast horizon. Household consumption growth was revised lower near term but was then little changed. Public demand was revised down in H2 2024 but up from 2025 and 2026. A federal election is due by mid-May 2025.
• Given that easing of the labour market appears to have “stabilised”, employment growth was revised higher for Q4 2024 and Q2 2025 but the unemployment rate was unchanged. Wages were revised down across the forecast period.
• Productivity growth remains a problem and was revised lower across forecasts.