The Reserve Bank of Australia has left the cash rate unchanged at 3.60 per cent, saying recent data point to upside risks for inflation even as economic activity continues to recover.
In its post-meeting statement, the Monetary Policy Board said inflation has “fallen substantially” since its 2022 peak but has picked up in recent months. While some of the increase in underlying inflation appears temporary, the Board noted early signs of a more broadly based rise that “may be persistent” and will require close monitoring. The monthly CPI series remains relatively new, adding uncertainty to how much weight policymakers can place on recent readings.
The Bank noted that private demand has strengthened, driven by gains in consumption and investment, while housing activity and prices continue to rise. Financial conditions have eased since early 2024 and credit remains readily available, though money-market rates and government bond yields have increased more recently. Earlier interest-rate reductions have also not yet fully flowed through to demand, prices or wages.
Labour market conditions were described as “a little tight”. The unemployment rate has edged higher over the past year and employment growth has slowed, but measures of underutilisation remain low. Capacity utilisation remains above long-run averages and many firms continue to report difficulties sourcing labour. Wage Price Index growth has eased from its peak, though broader wage measures and unit labour costs remain elevated.
The Board highlighted uncertainties around the economic outlook, noting that domestic momentum—particularly in the private sector—has been stronger than expected. If sustained, this could add to capacity pressures. Global uncertainty also remains significant, though the impact on major trading partners has so far been limited.
Given these conditions, the Board judged it appropriate to remain cautious, saying it will take longer to assess how persistent the inflation pressures may be. Today’s decision was unanimous, and the Bank reiterated that future moves will depend on incoming data, including trends in domestic demand, global conditions, inflation and labour market dynamics.
The Australian sharemarket weakened after governor Michele Bullock’s press conference. The S&P/ASX 200 Index had been trading 0.2 per cent lower before the announcement but closed down 0.5 per cent, or 38.50 points, at 8585.90. Bullock said she did not expect rate cuts “for the foreseeable future” and noted that a rate increase in 2026 could not be ruled out, comments that pushed the Australian dollar up 0.3 per cent to US66.42¢.
