RBA cuts rates again, warns of rising threat to pay packets
Shortly after the RBA trimmed the cash rate to 3.6 per cent – its lowest level in more than two years – on Tuesday, the nation's four major banks announced plans to cut their key lending rates by a quarter percentage point. On a $600,000 mortgage, the cut delivers a $100 a month saving.
At a press conference following the decision, Bullock said the board was 'fully behind' the decision to cut after its members last month made a 6-3 split decision to keep rates on hold against economists' expectations.
The bank has three more meetings this year. Financial markets believe a rate cut in September is unlikely, but put the chance of one at its November meeting at 92 per cent. By December, markets are convinced the Reserve will have the cash rate at 3.35 per cent, its lowest point since early 2023.
The RBA also revised down its assumption for the country's productivity from 1 per cent to 0.7 per cent for the next two years. Next week, Treasurer Jim Chalmers will head the government's three-day economic roundtable that will examine policies to lift the nation's economic speed limit.
Bullock warned that weaker productivity growth was already being felt by Australians. 'Real wages are not rising by very much because that's the implication of slow productivity growth … that real wages can't grow as quickly,' she said.
Bullock said the latest inflation figures, which came in at 2.7 per cent in the year to June, gave the bank the confirmation it needed to make its latest interest rate cut but noted households were still feeling the pain of higher costs.
In its monetary policy statement, the RBA said the jobs market was 'still a little bit tight' despite the unemployment rate rising to 4.3 per cent in June, and that it remained cautious about the outlook for the economy.
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