Statement by the Monetary Policy Board: Monetary Policy Decision | Media Releases

The Reserve Bank of Australia left the cash rate unchanged at 3.60% in a unanimous decision, citing a stronger-than-expected recovery in private demand alongside a recent pickup in inflation that may partly be temporary but shows some broader-based signs that could prove persistent. The Board noted easing financial conditions, abundant credit and that earlier rate cuts have yet to fully flow through, while money-market rates and bond yields have risen recently; labour markets remain a little tight with low underutilisation and solid wage and unit‑labour‑cost growth despite slowing employment. Given upside risks to inflation and uncertainty from a new CPI series and global conditions, the RBA will remain cautious and data‑dependent, signalling potential for further policy response if domestic momentum and inflation persistence continue.

Analysis

The Reserve Bank of Australia left the cash rate unchanged at 3.60% in a unanimous decision while flagging a recent pickup in inflation after its 2022 peak; the Board noted some of the rise may be temporary and that the new monthly CPI series adds uncertainty to near-term readings. The statement highlights a stronger-than-expected recovery in private demand—driven by consumption and investment—and an ongoing pick-up in housing activity, even as earlier rate reductions have not fully transmitted to demand, prices and wages. Financial conditions have eased year-to-date with credit readily available, but money-market rates and government bond yields have risen recently, complicating the transmission of policy.

Labour-market indicators remain "a little tight": unemployment has risen gradually and employment growth has slowed, yet underutilisation remains low, surveyed capacity use is above average and many firms report labour shortages; Wage Price Index growth has eased from its peak but broader wage measures and unit labour costs remain high. The Board judged upside risks to inflation have increased and will remain data-dependent, signalling a cautious stance that could lead to policy tightening if the pick-up proves persistent. The RBA emphasised monitoring global and domestic developments, leaving the near-term outlook contingent on coming CPI and labour-market data.

Key Decisions for Investors

• Shorten duration in Australian fixed-income portfolios given the RBA pause at 3.60% alongside recent rises in money-market rates and government bond yields, favoring short-to-intermediate maturities and active duration management
• Monitor upcoming monthly CPI prints and labour-market releases closely as the RBA is explicitly data-dependent; treat persistent upside surprises as a trigger to increase rate-hedges or reduce duration exposure
• Favor selective exposure to Australian banks and corporate credit that can benefit from stronger private demand and housing activity, but size positions conservatively because easier financial conditions raise cyclical and competition risks
• Reduce conviction in highly rate-sensitive equities and listed real estate until inflation persistence is clearer; consider partial hedges or shift toward companies with pricing power and stable cash flows