RBA Remains Cautious Despite Economic Slowdown

2

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
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Finance News

Clear

Celebrating the Success of the 2025 Sydney International On-Water Boat Show

24 Nov 2025: Paige Estritori

The 56th Sydney International On-Water Boat Show has wrapped up after four dynamic days at Darling Harbour, drawing over 20,000 visitors and featuring more than 160 vessels from 120 leading international and Australian marine brands. This year's event underscored the strength and appeal of Australia's marine lifestyle and industry. - read more

Marina Bayside Hosts First-Ever Southern Sydney Marine Expo

24 Nov 2025: Paige Estritori

On 8 November 2025, Marina Bayside in Taren Point proudly hosted the inaugural Southern Sydney Marine Expo, marking a significant milestone for Sydney's boating community. This event celebrated the opening of the $20 million purpose-built facility, designed to revolutionise marine services and storage in the region. - read more

BIA Announces Innovative Changes to Australia's Boat Shows in 2025

24 Nov 2025: Paige Estritori

In a strategic move to align with evolving industry needs and global trends, the Boating Industry Association (BIA) has announced significant changes to Australia's boat show landscape for 2025. These changes aim to enhance engagement, showcase innovation, and cater to the diverse interests of the boating community. - read more

BIA Advocates for Enhanced Support in Australia's Marine Manufacturing Sector

16 Nov 2025: Paige Estritori

The Boating Industry Association Ltd (BIA) has recently called upon all levels of Australian government to provide strategic support to the nation's marine manufacturing and recreational boating sector. This appeal comes in response to a significant skills shortage that poses a threat to the industry's economic potential. - read more

Experience the Sydney International On-Water Boat Show 2025

16 Nov 2025: Paige Estritori

The Sydney International On-Water Boat Show is set to make a grand return from 13 to 16 November 2025 at Darling Harbour. This four-day event promises to be a highlight for boating enthusiasts and industry professionals alike, showcasing Australia's vibrant marine lifestyle. - read more

Australian Superyacht Conference 2026: Embracing a New Era

16 Nov 2025: Paige Estritori

Superyacht Australia has announced the return of the Australian Superyacht Conference in 2026, introducing a refreshed format and a new location in Sydney. Traditionally held on the Gold Coast in May ahead of the Sanctuary Cove International Boat Show, the conference will now take place immediately following the inaugural Sydney Charter Show, creating an exciting week of activity for Australia's growing superyacht sector. - read more

Click for more Finance News