Australian economic outlook uncertain; RBA keeps interest rates steady

Despite encouraging signs, the economic outlook is uncertain and the central bank remains highly attentive to inflation risks. Returning inflation to target within a reasonable timeframe remains its highest priority, it said in a release.

Inflation to projected to return to the target range of 2-3 per cent in 2025, and to the mid-point in 2026.

Australia’s central bank today decided to leave the cash rate target unchanged at 4.35 per cent and the interest rate paid on exchange settlement balances unchanged as well at 4.25 per cent.
Despite encouraging signs, the economic outlook is uncertain and the bank said returning inflation to target within a reasonable timeframe remains its highest priority.

Though inflation continued to ease in the December quarter last year, it remains high at 4.1 per cent.

Goods price inflation was lower than the RBA’s November forecasts. It has continued to ease, reflecting the resolution of earlier global supply chain disruptions and a moderation in domestic demand for goods.

Higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy.

Accordingly, conditions in the labour market continue to ease gradually, although they remain tighter than is consistent with sustained full employment and inflation at target.

Wage growth has picked up but is not expected to rise much further and remains consistent with the inflation target, on the assumption that productivity growth increases to around its long-run average.

Inflation is still weighing on people’s real incomes and household consumption growth is weak, as is dwelling investment.

Employment is expected to continue to grow moderately and the unemployment rate and the broader underutilisation rate are expected to increase a bit further, the bank added.

Fibre2Fashion News Desk (DS)