RBA’s “Job Is Not Yet Done”, Keeping Its Options Open

Governor Bullock has just given her first post-meeting press conference and said that the Board is “not ruling in or out anything” and that the risks are “broadly balanced”. The central bank has made good progress in bringing inflation down but the “job is not yet done” as inflation still has a 4 in front of it. It needs to be convinced that inflation will sustainably return to the band before it can ease policy, and so it will remain flexible and highly data dependent. Currently it looks like rates will be unchanged through at least H1 2024.

• The RBA thinks that policy is currently restrictive enough to return inflation to target but is alert to risks in “either direction”. They are on the “narrow path”.
• The goal is to keep employment growth positive but unemployment will still rise as labour supply is growing faster, but that should help ease wages growth, which is already being seen in some sectors as businesses find it easier to find staff.
• The Governor said that the changes to tax cuts were not a material issue and that different marginal propensities to consume made only marginal differences. And when asked about the upcoming budget, she said that the government was very aware of inflation.
• The breakdown of the vote and the requirement for other Board members to speak won’t be implemented until July 1 and requires legislation to pass first.
• The OCR path in the forecast table represents the assumptions used to calculate the other forecasts and is not an expectation or projection where rates are going. Bullock reiterated that the further out the forecasts are the less certainty there is.