Statement by Philip Lowe, Governor: Monetary Policy Decision - June 2019 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2019-06-04

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
4 June 2019
At its meeting today, the Board decided to lower the cash rate by 25 basis points to
1.25 per cent. The Board took this decision to support employment growth and provide greater
confidence that inflation will be consistent with the medium-term target.
The outlook for the global economy remains reasonable, although the downside risks stemming from the
trade disputes have increased. Growth in international trade remains weak and the increased uncertainty
is affecting investment intentions in a number of countries. In China, the authorities have taken steps
to support the economy, while addressing risks in the financial system. In most advanced economies,
inflation remains subdued, unemployment rates are low and wages growth has picked up.
Global financial conditions remain accommodative. Long-term bond yields and risk premiums are low. In
Australia, long-term bond yields are at historically low levels. Bank funding costs have also declined
further, with money-market spreads having fully reversed the increases that took place last year. The
Australian dollar has depreciated a little over the past few months and is at the low end of its narrow
range of recent times.
The central scenario remains for the Australian economy to grow by around 2¾ per cent in
2019 and 2020. This outlook is supported by increased investment in infrastructure and a pick-up in
activity in the resources sector, partly in response to an increase in the prices of Australia's
exports. The main domestic uncertainty continues to be the outlook for household consumption, which is
being affected by a protracted period of low income growth and declining housing prices. Some pick-up in
growth in household disposable income is expected and this should support consumption.
Employment growth has been strong over the past year, labour force participation has been increasing,
the vacancy rate remains high and there are reports of skills shortages in some areas. Despite these
developments, there has been little further inroads into the spare capacity in the labour market of
late. The unemployment rate had been steady at around 5 per cent for some months, but ticked
up to 5.2 per cent in April. The strong employment growth over the past year or so has led to
a pick-up in wages growth in the private sector, although overall wages growth remains low. A further
gradual lift in wages growth is expected and this would be a welcome development. Taken together, these
labour market outcomes suggest that the Australian economy can sustain a lower rate of
unemployment.
The recent inflation outcomes have been lower than expected and suggest subdued inflationary pressures
across much of the economy. Inflation is still however anticipated to pick up, and will be boosted in
the June quarter by increases in petrol prices. The central scenario remains for underlying inflation to
be 1¾ per cent this year, 2 per cent in 2020 and a little higher after
The adjustment in established housing markets is continuing, after the earlier large run-up in prices
in some cities. Conditions remain soft, although in some markets the rate of price decline has slowed
and auction clearance rates have increased. Growth in housing credit has also stabilised recently.
Credit conditions have been tightened and the demand for credit by investors has been subdued for some
time. Mortgage rates remain low and there is strong competition for borrowers of high credit
Today's decision to lower the cash rate will help make further inroads into the spare capacity
in the economy. It will assist with faster progress in reducing unemployment and achieve more assured
progress towards the inflation target. The Board will continue to monitor developments in the labour
market closely and adjust monetary policy to support sustainable growth in the economy and the
achievement of the inflation target over time.
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