RBA Governor speaks after interest rates held on June 18, 2024

Australian Community Media

Reserve Bank Governor Michele Bullock spoke to the media after the central bank's decision to hold interest rates at 4.35 per cent on June 18, 2024.

Transcript

00:00Inflation has come down a long way since it peaked in 2022, both in Australia and overseas.

00:06And part of this was the resolution of supply chain issues, and also energy prices easing

00:11which has helped.

00:12But it also reflects the tightening of monetary policy all around the world and that's helping

00:17to dampen demand.

00:20That said, inflation is still above central bank targets in many economies and it is proving

00:24to be sticky.

00:26And the progress in getting inflation down has slowed and Australia isn't any different

00:30here.

00:32So since the previous meeting we've had March quarter national accounts which has told us

00:36a few interesting things.

00:39First the March quarter consumption data and upward revisions to its history mean that

00:43consumption growth has been a bit stronger than we thought and the savings rate a bit

00:47lower.

00:48At the same time, I think you'll all remember that GDP barely grew in the quarter and consumption

00:54per capita continued to decline.

00:57We do expect that household real incomes will rise later in the year with tax cuts

01:01and lower inflation, so it is possible that consumption growth will also be a bit stronger.

01:08But we also know that many households are really feeling the impacts of high inflation

01:12and higher interest rates.

01:14And as I noted earlier, on average households have reduced their saving rate by more than

01:19we thought to support their spending.

01:21It's tough just to keep up with essentials.

01:23Groceries, petrol, health, education, rents, insurance expenses, I could go on, they're

01:29all going up.

01:31On the other hand, labour market conditions are quite strong.

01:36The unemployment rate published last week was at 4% for May.

01:41Employment is still growing, it's just growing a bit more slowly than it was a year or so

01:44ago.

01:45Now this is important for the other part of our mandate because people having jobs is

01:50critical to them being able to meet the challenges of the higher cost of living.

01:55Wages growth in the March quarter was a bit weaker than expected and we think it's likely

01:59to have passed its peak for the current cycle, but growth of unit labour costs was still

02:04a bit high.

02:06The monthly CPI indicator for April was stronger than expected, however there's been limited

02:12information about services inflation since the May board meeting.

02:16And this is where the most recent strength has been coming from.

02:20So really we need to get more comprehensive readings on inflation before we can get a

02:25handle on the momentum in services inflation.

02:29So what does this all mean?

02:31Well the recent data have been mixed, but overall I think they reinforce the need to

02:36remain vigilant to the upside risks to inflation.

02:39We still think we're on the narrow path, but it does appear to be getting a bit narrower.

02:45We need a lot to go our way if we're going to bring inflation back down to the 2% target

02:50range.

02:51The board does need to be confident that inflation is moving sustainably towards target and it

02:56will do what is necessary to achieve that outcome.

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