Statement on Monetary Policy August 2024
Central bank: rba | Document type: inflation_report | Date: 2024-08-01

Statement on Monetary Policy – August 2024
Inflation is still too high and is coming down slower than we expected. There is
a risk that inflation stays above the target range for too long. Bringing
inflation down in a reasonable timeframe is the Board’s highest priority.
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What is going on in the economy?
Inflation is still too high because demand is still too strong.
Growth is recovering slowly in many advanced economies, but progress in
lowering inflation has been mixed.
In Australia, there is still more demand for goods and services than the
economy can sustainably supply, causing inflation to be persistent.
Conditions in the labour market are easing but still tight, and wages growth
remains high even though productivity growth is weak.
How do we see the economy developing?
Economic growth is expected to pick up next year.
The outlook for growth has been upgraded due to stronger-than-forecast
public demand as well as a pick-up in household spending as real incomes
rise. These factors are expected to be partly offset by stronger growth in
imports, and weaker growth in housing construction.
The labour market is expected to continue easing gradually but to remain tight.
The participation rate remains strong and average hours worked have proven
resilient. Job vacancies have come down, but they are still higher than
before the pandemic. The unemployment rate is expected to keep slowly rising
until early 2025 but the expected recovery in GDP growth should continue to
support demand for labour.
Inflation is expected to take longer to return to target.
Demand in the economy is likely to be high for some time due to underlying
inflationary pressures. Headline inflation is expected to come down
temporarily due to cost-of-living support, before rising again when that
support ends. Headline and underlying inflation are expected to track towards
the midpoint of the target in 2026.
Uncertainties remain. On the one hand, there could be further delays to
returning inflation to target if the labour market is tighter than we think
or if the pick-up in GDP growth is stronger than we expect. This could cause
inflation expectations to increase, leading to further interest rate rises
and higher unemployment to bring inflation back to the target.
On the other hand, the labour market could soften faster or further than
forecast if demand turns out to be weaker. This would lead inflation to be
lower than we expect.
What did the Board decide?
At its August meeting, the Board decided to hold the cash rate.
Returning inflation to target within a reasonable timeframe remains the
Board’s highest priority. The Board’s decision balances the risk that
inflation could take longer to return to target with the risk that the
labour market could ease significantly more than forecast. The cash rate
will need to remain high enough to ensure inflation returns sustainably to
the target range.
More on the August 2024 monetary policy decision...
Reserve Bank Board Statement
The Board decided to leave the cash rate target unchanged at 4.35 per cent.
Monetary Policy Board Statement
Media Conference
Governor Michele Bullock addresses the media after the monetary policy decision.
Media Conference
Monetary Policy Minutes
Minutes of the Reserve Bank Board meeting, published two weeks after the decision.
Monetary Policy Minutes