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

What ASIC’s Car Loan Review Means for Australian Buyers

23 Jul 2026: Paige Estritori

Australia’s car finance market is sending buyers two important messages at once. Recent July rate snapshots show some secured car loans advertised from around the mid-five per cent range for strong-credit borrowers, suggesting competition is still alive for well-prepared applicants. At the same time, ASIC’s 24 June 2026 review of motor vehicle finance has put the spotlight on fees, third-party sales channels and borrower outcomes. - read more

What July’s Cheapest Car Loan Rates Mean for Australian Buyers

16 Jul 2026: Paige Estritori

Australian car buyers have a fresh benchmark for what a competitive loan may look like, with Canstar’s July 2026 car loan snapshot showing some secured new and near-new car loans advertised from the high five per cent range. For households already juggling fuel, insurance, registration and cost-of-living pressures, that headline number may look appealing. - read more

Luxury Car Tax Thresholds Rise for 2026-27: What It Means for Your Next Car Loan

02 Jul 2026: Paige Estritori

Australian buyers shopping for a higher-priced new car have a fresh number to factor into their budget from 1 July 2026, with the Luxury Car Tax thresholds indexed for the 2026-27 financial year. - read more

What the 2026 Car Loan Awards Mean for Australian Buyers

25 Jun 2026: Paige Estritori

The latest 2026 personal and car loan awards from Mozo point to a clear message for Australian motorists: the lowest-cost car finance may not come from the lender you already bank with. The awards assessed hundreds of personal and vehicle loan products across dozens of lenders, with categories covering new car loans, used car loans, secured personal loans, excellent-credit borrowers and green car finance. - read more

RBA Maintains Cash Rate at 4.35% in June 2026 Decision

11 Jun 2026: Paige Estritori

In its June 2026 meeting, the Reserve Bank of Australia (RBA) decided to hold the cash rate steady at 4.35%. This unanimous decision reflects the central bank's cautious approach amid ongoing economic uncertainties and inflationary pressures. - read more

Click for more Finance News