RBA Remains Cautious Despite Economic Slowdown

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Though the economy is experiencing a downturn, RBA Governor Michele Bullock emphasizes that the demand for goods and services still outstrips supply capabilities.

"It's understandable that people think a slower economy should lead to rate cuts, but we need tangible inflation improvement before making such a move," Bullock stated during her speech on Thursday.

This comes in the wake of a modest 0.2% economic growth in the June quarter, with an annual increase holding at 1%, marking the lowest since the 1991 recession outside the pandemic period.

The slowdown was anticipated as a consequence of maintained high-interest rates aimed at dampening demand to curb inflation.

Despite slowing growth, Bullock pointed out that demand remains high partly because post-pandemic resurgence has sustained some strength in the economy.

She also mentioned the ongoing underperformance on the supply side, particularly in productivity growth.

"It's a matter of growth rates versus levels," she explained at the Anika Foundation Fundraising Lunch, indicating that inflation persists due to demand remaining higher than supply capabilities.

This protracted wait for interest rate cuts is challenging for the federal government, which faces scrutiny over its budgetary decisions and their impact on inflation.

Bullock acknowledged that both federal and state governments are wrestling with inflation as it directly affects their regions' residents.

When asked if Treasurer Jim Chalmers was shifting blame to the RBA, Bullock refrained from commenting directly but clarified both were committed to their roles.

The opposition has leveraged the national accounts to criticize the government, with Shadow Treasurer Angus Taylor suggesting a conflict between government spending and RBA's inflation control measures.

In defense, Finance Minister Katy Gallagher highlighted that the government's expenditure was strategically targeted to support the economy without exacerbating inflation;

"Had the government not provided necessary aid during this period, the economic figures would have been worse," Gallagher told ABC TV on Thursday.

Bullock further dedicated significant portions of her speech to the hazards posed by stubborn high inflation.

She cautioned that although inflation expectations are stable, this stability is not guaranteed. A scenario of expected consistent price rises could necessitate further interest rate hikes.

"In that case, we would need to throttle the economy more, leading to higher unemployment and potential recession," she warned.

Prolonged inflation risks pushing more borrowers, particularly those with lower incomes, into mortgage stress and potentially forcing home sales.

"High inflation is why there is so much cost of living discussion - it adversely affects everyone, especially the most vulnerable,” Bullock concluded.

Published:Friday, 6th Sep 2024
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

Share this news item:

Finance News

Clear

Significant Rise in First Home Buyer Loans in December Quarter

23 Apr 2026: Paige Estritori

The Australian Bureau of Statistics (ABS) has reported a notable 6.8% increase in the number of new first home buyer loans during the December quarter of 2025, bringing the total to 31,783. This marks the most substantial rise since the December quarter of 2023. - read more

Extended Deposit Saving Periods Challenge First Home Buyers

23 Apr 2026: Paige Estritori

According to Domain's First Home Buyer Report 2026, aspiring homeowners are now facing longer periods to save for a deposit, as property prices continue to rise faster than wage growth. Over the past five years, entry-level house prices have surged by 68%, while wages have only increased by 21%. - read more

Intensified Competition for Affordable Homes Between First Home Buyers and Investors

23 Apr 2026: Paige Estritori

The Australian property market is witnessing heightened competition between first home buyers and investors, particularly for affordable homes. Recent data indicates that both groups are increasingly targeting similar entry-level properties, leading to a surge in demand and subsequent price increases. - read more

Navigating Break Costs in Fixed-Rate Mortgage Refinancing

21 Apr 2026: Paige Estritori

Refinancing a fixed-rate mortgage can offer Australian homeowners opportunities to secure better loan terms or access additional features. However, it's crucial to understand the potential break costs associated with ending a fixed-rate loan prematurely. - read more

Current Mortgage Refinance Interest Rates in Australia for 2026

21 Apr 2026: Paige Estritori

As of 2026, Australian homeowners are presented with competitive mortgage refinance interest rates, making it an opportune time to consider refinancing. With the Reserve Bank of Australia adjusting the cash rate earlier this year, many lenders are offering refinance options starting in the low 5% per annum range for well-qualified applicants. - read more

Click for more Finance News