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

New BIA President Points to a Growing Australian Boating Market

18 Jun 2026: Paige Estritori

The Boating Industry Association has marked a significant leadership milestone, electing Tracy Souris as its new Board Chair and President on 12 May 2026. Souris becomes the first woman to lead the organisation since it was established in 1960, taking over from Adam Smith after his six years of service on the BIA Board. - read more

Vessev's Electric Hydrofoiling Vessels Set to Transform Swan River Transport

10 Jun 2026: Paige Estritori

New Zealand-based company Vessev is set to revolutionise water transport in Western Australia by introducing a fleet of electric hydrofoiling vessels on Perth's Swan River. In partnership with the ENAUTIC Group, Vessev aims to provide a sustainable and efficient solution to the region's transportation needs. - read more

ACCC Halts BRP's Sale of Telwater to Yamaha

10 Jun 2026: Paige Estritori

The Australian Competition and Consumer Commission (ACCC) has recently blocked the proposed sale of Telwater Pty Ltd., one of Australia's largest aluminium boat manufacturers, from BRP Inc. to Yamaha Motor Australia. This decision ensures that Telwater remains under BRP's ownership for the foreseeable future. - read more

ATSB Releases Preliminary Findings on RSV Nuyina Grounding

03 Jun 2026: Paige Estritori

The Australian Transport Safety Bureau (ATSB) has released a preliminary report detailing the circumstances surrounding the grounding of the Australian Antarctic Division's research vessel, RSV Nuyina, off Heard Island on October 13, 2025. The incident occurred during drone survey operations near uncharted sea floor areas. - read more

WA Government Approves Cockatoo Island Aviation and Marine Hub

03 Jun 2026: Paige Estritori

The Western Australian government has granted final approval for the construction of a $300 million aviation and marine hub on Cockatoo Island, located in the Buccaneer Archipelago, approximately 130 kilometres north of Derby. The project, spearheaded by privately owned company Crestlink, aims to establish a comprehensive logistics hub to service the offshore oil and gas industry. - read more

Ocius to Deliver Fleet of Bluebottle Uncrewed Surface Vessels

03 Jun 2026: Paige Estritori

The Australian Government has committed $176 million to acquire a fleet of Australian-designed and built Bluebottle uncrewed surface vessels (USVs) from Ocius Technology. This investment aims to bolster the Royal Australian Navy's undersea warfare capabilities by providing persistent, long-range intelligence, surveillance, and reconnaissance (ISR) operations. - read more

Click for more Finance News