Board chose to keep the cash rate steady at 3.60 per cent.

Inflation has dropped sharply from its 2022 peak, but has shown some renewed upward movement recently. The Board believes parts of the recent rise in underlying inflation are temporary, and there is still uncertainty about how much weight to place on the new monthly CPI figures. Even so, the data indicate a broader lift in inflation, some of which may persist and will need to be watched closely.

Economic activity continues to improve. Private demand has strengthened, supported by both consumer spending and investment. Housing market activity and prices are also rising. Financial conditions have loosened relative to earlier in the year, credit remains readily accessible to households and businesses, and the impact of earlier rate cuts has not yet fully filtered through to demand, prices, and wages. However, money market rates and government bond yields have increased more recently.

Labour market indicators show conditions remain somewhat tight. Unemployment has edged higher over the past year and job growth has slowed, but measures of underutilisation are still low. Capacity utilisation is above long-term averages, and business surveys continue to report ongoing difficulties finding workers. Wage growth, based on the Wage Price Index, has eased from its high point, but broader wage measures still show strong increases, and unit labour costs remain elevated.

The outlook for domestic economic activity and inflation is uncertain, as is the degree to which monetary policy is still restrictive. Momentum in the domestic economy—especially in the private sector—has been stronger than expected, which could intensify capacity pressures if it persists. Global uncertainties are also notable, though so far they have had limited effect on growth and trade among Australia’s major trading partners.

Decision
Recent data indicate that inflation risks have shifted upward, but more time is needed to determine how persistent these pressures will be. Private demand is rebounding, and although labour market conditions appear somewhat tight, a gradual easing is anticipated. Given this, the Board decided a cautious approach is appropriate and will continue to reassess the outlook as new data are received.

The Board will closely monitor incoming data and the evolving economic assessment to inform its decisions. It will pay particular attention to global economic and financial developments, domestic demand trends, and the forecasts for inflation and employment. Its priority remains achieving price stability and full employment, and it will act as needed to fulfil this mandate.

Today’s decision was reached unanimously.