Ahead of the bank’s change in language,markets had expected only one rate cut by May.
Treasurer Jim Chalmers said the bank’s statement made clear it was gaining confidence that inflationary pressures were easing,noting the government was trying to support the economy and households struggling under cost-of-living pressures.
“We are making progress on that front,but we know that people are still under very substantial pressure and that’s why rolling out our cost-of-living help is so important,” he said.
Shadow treasurer Angus Taylor said the Reserve Bank was lagging central banks in the United Kingdom,United States and Canada in cutting interest rates,but that “dramatic growth” in public spending across the economy was to blame.
“If this government had got its settings right,it would be easier for the Reserve Bank to reduce interest rates,and we’d already be seeing inflation back at a lower level,” he said.
Bullock rejected criticism by some commentators about the sharp increase in people employed in government-supported areas of the economy such as health,aged care and childcare,saying this work was vital to the economy.
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“The jobs that these people are doing are very valuable jobs. I don’t want the debate about market and non-market employment to end up in a sort of a debate about whether or not these are worthy jobs or not. They are worthy jobs,they’re important jobs,” she said.
Moody’s Analytics’ head of China and Australia economics,Harry Murphy Cruise,said while official interest rates did not change,the bank’s tone about the economy and the future direction of interest rates had.
He said that dropping the term “not ruling anything in or out” meant a possible rate increase had been ruled out.
“So,with a more dovish tilt by the board and a hike off the table,the fight against inflation enters its final stretch,” he said.
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Deutsche Bank’s chief economist for Australia,Phil O’Donaghoe,was one to change his mind on when the RBA would start cutting interest rates,saying the bank’s “dovish tilt” meant its February meeting was now in play.
“We now expect four 25-basis-point rate cuts in 2025,at each of the February,May,August and November policy meetings,leaving the cash rate at 3.35 per cent by end-2025,” he said.
But EY chief economist Cherelle Murphy cautioned against people expecting immediate interest rate relief.
“While the statement from the board acknowledged the weak September-quarter GDP result and wage pressures easing more than expected,there was little to suggest they were any closer to a rate cut than at the last meeting,” she said.
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