00:00Michelle Bullock, the Governor, said inflation is basically still too high and the Reserve
00:06Bank is attempting to lower inflation with interest rates while without too many people
00:12losing their jobs.
00:13So they're walking a narrow path, as they say, trying to do these two things at once.
00:18Michelle Bullock just now in this press conference was asked by the ABC's David Chow, a colleague
00:24of mine on News Channel, about why the RBA hasn't started cutting interest rates yet.
00:29And she responded by saying basically inflation just isn't where it needs to be yet.
00:33Let's take a listen.
00:34It's true that some of the economic data has been a bit softer and it's also true that
00:41some of the nominal side, in particular inflation, is remaining quite elevated.
00:46So you've got two sets of data which are telling you possibly different things.
00:51What I would suggest is that, and I've said this before, there is a difference between
00:57the rate of growth of the economy, and we all know it's slowing, and the private sector
01:01in particular is slowing, and the level of demand.
01:05And we've been making this point for some time that growth exploded so strongly coming
01:12out of the pandemic that it got to very strong and a very high level and the economy couldn't
01:17supply the goods and services that people were demanding coming out of the pandemic.
01:21We're still experiencing that, so we have to have a period of slower growth, but our
01:27forecast suggests that growth will start to pick up as real disposable incomes start
01:32to pick up over the coming year, and that inflation will continue to come down.
01:36So we still think we're on that path.
01:39Reserve Bank Governor Michelle Bullock speaking there just a short time ago.
01:42And so Nadia, there were some really interesting subtle changes in language, essentially before
01:48they were having kind of two bob each way about whether rates were going to go up or
01:51down, and now they're kind of tending to be more optimistic about rates going down
01:58in the next move.
02:00So what did she have to say about that language, and what does that indicate about when a cut
02:06might come?
02:07Yeah, you're exactly right.
02:08So this statement and what Michelle Bullock announced is seen to be using language that's
02:14a bit more optimistic or dovish.
02:15So along with the decision, the RBA releases a statement, and if you read through the language,
02:20it's really interesting, they provide some clues about where they could be heading next.
02:25So the statement said, in part, the board is gaining some confidence that inflation
02:30is moving sustainably towards target.
02:32So that's a lot more positive than language we've seen previously.
02:36And notably, this is also the first time the RBA hasn't used this well-worn phrase they
02:40would always refer back to saying the board is not ruling anything in or out, you know,
02:44bob each way, as you said.
02:46So we can assume from that, that the next move for the RBA will be a cut rather than
02:52a hike in interest rates.
02:55Most economists think that will come in around May next year.
02:59It'll be interesting to see if any have changed that forecast following today's decision.
03:03And I spoke to economist Angela Jackson a little earlier for her take.
03:08I think it will certainly be in the next half of next year.
03:11The question is whether or not the Reserve Bank moves too soon or too late.
03:16So they are really, you know, and we've talked about this, it's a tightrope.
03:19They're trying to bring inflation down without causing a recession.
03:22Now, we've seen with the latest figures in terms of how the economy is growing, that
03:26the only thing keeping the economy in the positive at the moment is the government,
03:30is fiscal policy.
03:32That means the private sector is very, very weak and is really calling out and urgently
03:37calling out for that rate cut.
03:39The Reserve Bank will move when it feels confident that it can do so without unleashing those
03:44inflationary pressures.
03:45Now, the hope is that that will be in February.
03:48I think there is all indications that really we're getting enough indications now that
03:52the economy has slowed enough for the Reserve Bank to start easing monetary policy.
03:58But we are going to have to wait and see.
03:59It is going to really depend on what the data says between now and then about whether or
04:04not the Reserve Bank feels confident enough to move.
04:07As Angela Jackson was saying, a bit more positive sentiment, but we will have to wait until
04:12February 18th next year to see where they go next.
04:15That is when the board will next get together.
04:19And that's your finance news for now.
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