Change to economic snapshots
The Board at the Reserve Bank will only meet 8 times this year instead of 11. More time is needed to assess the economy’s response to cash rate changes. The next meeting will be held on 6 May.
Inflation: 4.1 per cent
Core inflation continues to decline. Since the February 2023 peak of 7.8 per cent, this is an undeniable achievement for the Reserve Bank, and a strong indicator of a soft landing for the Australian economy. Inflation is on track to return to the target 2-3 per cent by 2025.
Cash Rate Target: 4.35%
The RBA has kept the cash rate steady since the November 2023 meeting. The Board continues to pursue its inflation target of 2-3 per cent. Further hikes in 2024 remain a possibility but seem unlikely. Major banks are projecting cash rates cuts between September and November 2024. However, the RBA is likely to hold off until early 2025.
Economic Growth 1.5%
Economic growth has slowed again since our last update but remains positive. It’s quite remarkable that economic growth has remained positive, despite the consecutive cash rate hikes. Households continue to cut back on discretionary spending and domestic demand continues to slow.
Wage Growth 4.2 per cent
Wage growth has increased again, and for the first time in years, has exceeded the inflation rate. As inflation falls, this wage growth will take effect throughout the economy. On the flipside, whilst wage growth does alleviate the cost of living in some sense, it can also be a driver for inflation, keeping prices higher, for longer.
Unemployment Rate: 4.1 per cent
The unemployment rate has increased again slightly since our last update, hitting a two-year high. From a historical perspective, this is still low. This increase is due to cooling consumer demand and a slowing economy. The Board will be unlikely to reduce the cash rate until unemployment rises.