Sydney Australia skyline

Australia Monetary Policy June 2019

Australia: RBA cuts rates in June on weak inflation and higher unemployment

At its 4 June monetary policy meeting, the Reserve Bank of Australia (RBA) cut the cash rate to a fresh all-time low of 1.25% from 1.50%, where it had been since August 2016. The move matched expectations of a rate cut due to low inflation and subdued economic activity. Moreover, the RBA did not rule out a further rate cut in case the labor market underperforms.

Stubbornly-low inflation, a pick-up in unemployment and heightened global trade tensions were behind the Bank’s decision to reduce the policy rate. Inflation slowed to 1.3% in Q1 from Q4’s 1.8%, landing further below the Bank’s 2.0%–3.0% target, while the unemployment rate rose to 5.2% in April from March’s 5.1%. Moreover, subdued retail sales in Q1 and the first drop in retail sales in April point to a further weakening in consumer spending, which is being weighed down by sluggish wage growth, high levels of debt and a continued—albeit recently softening—correction in house prices. That said, robust non-mining business and infrastructure investment continues to underpin economic activity, while wage growth is picking up some steam. Against this backdrop, the Bank projects underlying inflation of 1.8% in 2019, before accelerating to 2.0% in 2020.

The Reserve Bank of Australia cited exacerbating global trade disputes and weakening investment intentions as the main downside risks to the global outlook. The communiqué suggests the RBA will leave the doors open to some further monetary policy loosening in the near-term, which will ultimately depend on the evolution of the labor market and spare capacity utilization.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest