Australia Interest Rate2023 Data - 1990-2022 Historical - 2024 Forecast - Calendar

The risks around the inflation outlook in Australia are broadly balanced, and if upside risks materialize, it could lead to prolonged high inflation and an increase in medium-term inflation expectations, the Reserve Bank of Australia (RBA) said in its quarterly Statement on Monetary Policy. The central bank acknowledged that cost pressure in Australia continued to fall in Q2 of 2023 but the inflation level at 6% was still too high. It reiterated that some further tightening may be needed but it will depend upon the data. Regarding economic forecasts, the central bank now sees economic growth slowing to 0.9% this year, down from the previous estimate of 1.2%, before picking up to 2.3% in 2025. Meantime, headline inflation is projected to ease to 4.1% by the end of the year, lower than earlier forecasts of 4.5%, but remains sticky in 2024, before returning to the target range of 2 to 3% in late 2025. The jobless rate is forecast to increase to 4.5% by mid-2025 from the current 3.5%.

The Reserve Bank of Australia kept its cash rate unchanged at 4.1% during its August meeting, extending the rate pause for the second successive month and defying market consensus of a 25bps rate hike. While highlighting that cost pressure in the country is easing, the central bank viewed that inflation at the level of 6% was still too high. The board reiterated that some further monetary tightening may be needed to ensure inflation returns to the target range of between 2 to 3% in a reasonable timeframe, adding that any rate adjustment will depend upon how the economy and prices evolve. The board projected that inflation will be around 3.25% by the end of 2024 and be back within the intended corridor in late 2025. Meantime, Australia's GDP growth is seen at around 1.75% over 2024 and unemployment is forecast to rise gradually to around 4.5% late next year. The central bank also kept unchanged the interest rate on Exchange Settlement balances at 4.0%.

The Reserve Bank of Australia considered raising the cash rate by 25bps to 4.35% before deciding to keep it unchanged at 4.1%, and realized that both sets of arguments were strong, minutes of the July 4 policy meeting showed. The board viewed that inflation in Australia had eased from its peak but remained too high. Market measures of short-term inflation expectations had declined from their peaks but also remained high. The committee agreed to reassess the situation in August as it waits for more data on inflation, the global economy, the labor market and household spending, as well as an updated set of staff forecasts and a revised assessment of the risks. Members reaffirmed their determination to return inflation to target within a reasonable timeframe and their willingness to do what is necessary to achieve that outcome. Regarding the GDP, the board noted that growth in Australia had slowed considerably. GDP increased by 0.2% in Q1 of 2023 and was expected to be similar in Q2.