Recent data indicates that annual headline inflation fell to 2.8 per cent in the September quarter, down from 3.8 per cent in the June quarter. However, this decline was partly attributed to temporary reductions in fuel and electricity prices, offering short-term cost-of-living relief, the Reserve Bank Board said in a statement.
Underlying inflation, as measured by the trimmed mean, still stood at 3.5 per cent over the year to September—above the RBA's target range. Projections from today’s Statement on Monetary Policy indicate that inflation is not expected to reach the 2.5 per cent target midpoint until 2026.
Australia’s economic growth has been described as weak, weighed down by past reductions in real disposable incomes and the continued impact of restrictive financial conditions on household spending. Despite this, aggregate consumer demand has shown resilience, supported by spending from temporary residents, including students and tourists.
The labour market remains tight, with employment growing robustly in recent months. The unemployment rate rose to 4.1 per cent in September, up from a historic low of 3.5 per cent in late 2022, while the participation rate remains at record levels. Wage growth has moderated but labour productivity remains at 2016 levels, despite some improvement over the past year.
The RBA noted that global economic conditions contribute to a highly uncertain outlook. While most central banks are cautiously easing policy, citing progress towards inflation targets, they remain alert to potential risks such as weakening labour markets and resurgent inflation.
The RBA will continue to use updated data and risk assessments to inform future policy decisions. While growth in household consumption is expected to improve later this year as income growth picks up, there remains a risk of slower-than-anticipated recovery, which could impact economic output and labour market conditions, the statement added.
Fibre2Fashion News Desk (KD)