The Reserve Bank of Australia (RBA) believes the local economy is softening, although domestic conditions have generally evolved in line with expectations.
The RBA noted during its latest monetary policy meeting, on 19-20 May, that GDP growth had picked up in late 2024. However, early 2025 data showed household consumption was weaker than expected. “Earlier declines in real household disposable income remain a constraint on consumption.” the RBA said, although rising wealth had provided some support.
Business sentiment and hiring intentions remain broadly stable. And unemployment has held at about 4.1% since mid-2024. However, wages growth has softened, and voluntary job turnover has declined. These point to reduced confidence among workers.
The RBA welcomed progress on inflation, with the trimmed mean measure returning to the target range of 2-3%. “We expected this path, and it confirmed that potential upside inflationary risks had not materialised,” it said.
At the meeting, the RBA cut the cash rate by 25 basis points. The cut brought it to 3.85%, and signaled it was prepared to cut again if downside risks from global developments were to materialise.