Interest Rate Cut 3.85% by RBA in August– But Will It Be Modest or Bold?

Believe me, holding the cash rate steady at 3.85% wasn’t a decision the RBA took lightly. It’s a reflection of a deep dive into our economic situation, both here at home and across the globe. I’ve seen inflation continue to ease off since its peak in 2022. That’s a huge win, and it tells me that the higher interest rates we’ve put in place have been doing their job, bringing demand and supply back into a healthier balance. In the March quarter, headline inflation was right where we want it, in the middle of our target range, and underlying inflation was at 2.9 percent. We’re on the right track, and that’s something to feel good about. But, just like in life, there’s always a bit of uncertainty. The world economy is still a bit of a mixed bag, and I’m keeping a very close eye on those international developments, because they can definitely ripple through to our shores. On the home front, though, I’m seeing some encouraging signs. Your household incomes are starting to pick up, and some of that financial stress many of you have been feeling is beginning to ease. Still, I hear from businesses that it’s not always easy to pass on rising costs, and demand can still be a bit soft in some areas. And then there’s the job market. It’s still strong, and that’s fantastic news for anyone looking for work. I’m seeing low rates of people who want more work but can’t find it, and businesses are saying me they’re still struggling to find the right people. While wages growth has come down a little from its highest point, productivity hasn’t quite caught up, meaning the cost of producing things is still a bit high. It’s a complex puzzle, and that’s why I felt it was wise to pause, gather a little more information, and make absolutely sure that inflation is heading sustainably towards our 2.5 percent target. I’m one of you, and I want to make sure we get this right.