Key eventsRBA’s Michele Bullock: ‘A rate cut is not on the agenda in the near term’The Guardian’s Peter Hannam asked Michele Bullock if the RBA considered a rate rise at the meeting, and what stopped them given financial conditions are less restrictive than they thought?Bullock says the the board did consider a rate rise at this meeting, as well as a hold.She said:
Inflation is forecast to come back into the band at the end of 2025. If you look back, that’s exactly where we were in November last year. Inflation coming back into the band at the end of 2025.
The board is trying, as we’ve said in the past, to steer a narrow path here, not result in a spike in unemployment. We want to try and keep employment growing if we can. And the judgement of the board was that keeping the interest rate where it is and making sure that people understand that a rate cut is not on the agenda in the near term, given what we know that continued pressure will help to keep demand coming back into line with supply.
That’s the judgement the board’s made. But I should say that they are vigilant to the upside risks and if it does appear that inflation is not tracking the way we are forecasting, then they will, if needed, increase interest rates.
ShareBullock: reduction in cash rate soon ‘doesn’t align’ with RBA’s current thinkingThe RBA governor Michele Bullock is effectively ruling out any reduction in interest rates in the near future.She says:
Based on what I know today and what the board knows today, what we can say is that a near term reduction in the cash rate doesn’t align with the board’s current thinking.
We’ve seen from overseas experience how bumpy inflation can be on the way down and across the economy. We need to see demand and supply coming back into better balance.
Now, I understand that this is not what people want to hear. I know there are many households and small businesses that are struggling with interest rates where they are. Many people are doing it tough and we’re very conscious of that. The board is very conscious of that.
But really the best thing we can do, and I’ve said this before, the best thing we can do is to bring inflation back down to target, because we can’t let inflation get away.
ShareRBA governor: ‘no guarantee’ supply and demand will return to balance quicklyBullock, pointing to the pandemic and the immediate post-pandemic period as examples, says demand has been higher than supply for some time now, which is why inflation has been so persistent. Things like shipping backlogs and shortages of certain goods overlapped with a period when people were demanding a lot of those things, she says.At the same time, energy costsrose when Russia invaded Ukraine.She continues:
All of these things conspired basically, and resulted in higher goods price inflation around the world. And that was the case in Australia as well.
Now, these supply shocks have largely now worked their way through the system. And what we’re dealing with is continued strong demand, particularly for services. And we’re using the tool we have, monetary policy, to operate on the demand side of the economy.
We’re trying to bring demand back into balance with supply and get the inflation rate back into the target band of between 2 and 3%.
But the fact is that the progress on bringing inflation down has been very slow for a year now. And while growth of demand has been slow, there’s actually no guarantee that supply and demand will return to balance quickly enough.
ShareUpdated at 07.42 CESTBullock says RBA still uncertain about economic outlook, inflation still too highReserve Bank Governor Michele Bullock is speaking to media now after the RBA’s decision to hold rates steady today. She says the RBA still has “some considerable uncertainty” about the economic outlook.
I want to highlight here that there is still a risk that inflation will take too long to return to target. So the recent CPI data were broadly in line with our expectations, our forecasts. But make no mistake, inflation is still too high and the board does remain concerned about the degree of excess demand in the economy.
Now, what I mean by that is that the amount of goods and services that households and businesses and government want to buy and need, that’s more than the amount that the economy can sustainably provide and supply.
ShareUpdated at 07.39 CESTReynolds angry about ‘how we had got it so wrong’Sarah Basford CanalesIn Perth, we’re breaking for lunch in the defamation trial brought by Liberal senator Linda Reynolds against her former staffer, Brittany Higgins.The afternoon block should resume at 2.15pm Perth time/4.15pm AEST. Shortly before the break, Reynolds’ lawyer, Martin Bennett, asked the senator how she felt upon seeing the news.com.au article revealing Higgins’ allegations publicly for the first time.Reynolds said she felt “sick”, adding:
As angry and upset as I was going through, reading this, I also started to feel sorry for her because … I started thinking ‘what have we missed?’
Reynolds later added she was “angry” at Higgins but also “angry at myself and how we had got it so wrong”.The Western Australian supreme court’s Justice Paul Tottle reminded Reynolds to confine her answers to the question being asked after defence raised the issue.ShareUpdated at 07.38 CESTAngus Taylor says government responsible for not breaking ‘the back’ of inflationShadow Treasurer Angus Taylor has just held a press conference in the wake of the Reserve Bank’s announcement that it is holding interest rates at the current level.He says he expects Australians to be relieved that rates haven’t gone up again, but that the Labor government should be held accountable for not “[breaking] the back of inflation”.Shadow Treasurer Angus Taylor says its bad news for families that inflation is still not within the target range. Photograph: Mick Tsikas/AAPThe RBA has “extended the time frame it’s going to take to get back to the target level of inflation”, he says.
This is bad news for Australian families that following from the government’s budget, it is very clear it’s going to take longer to get back to the target level of inflation. Indeed, it won’t be until well into 2026 and it will take longer also to get into the target range, which won’t happen until the end of 2025 …
Not only are we at the back of the pack in terms of dealing with inflation, we are [also] in terms of economic growth. Now, if the government had broken the back of inflation, we wouldn’t be in this situation.
ShareUpdated at 07.26 CESTEmily WindMany thanks for joining me on the blog today. I’ll handover to Stephanie Convery who will guide you through the rest of our rolling coverage this evening. Take care.ShareUpdated at 07.13 CESTReynolds returns to courtroom following earlier adjournmentSarah Basford CanalesLinda Reynolds has now returned to the courtroom after a brief health-related adjournment.She continues with her recount of what happened in the weeks leading up to the publication of Brittany Higgins’ alleged rape in Parliament House.SharePeter HannamRBA rate cut not likely any time soonBorrowers might have drawn some relief from the Reserve Bank’s cash rate hold today but a reading of the accompanying statement and 60-odd page quarterly statement of monetary policy suggests a rate cut isn’t around the corner.The RBA sees inflation as “persistent”, and the underlying inflation rate has remained above 2.5% – the midpoint of its target range – for 11 quarters in a row. And that underlying – or core – inflation figure “has fallen very little over the past year”.As you can see in our separate story, the tone of the RBA is very much “we haven’t seen the economy slow as much as we’d have liked” (to paraphrase):That means if there’s a bad inflation surprise in the current quarter – perhaps we’ve spent up big after our tax cuts and various rebates – then the next move by the RBA might even be a rate rise.Nothing “ruled in or ruled out”, as governor Michele Bullock will no doubt reinforce when she holds her presser shortly.Reserve Bank governor Michele Bullock is due to address the media soon. Photograph: Bianca de Marchi/AAPShareUpdated at 07.12 CESTInternational factors adding to domestic economic uncertainty, Chalmers saysCircling back to stock market volatility, Jim Chalmers is asked if he can provide any further details from his briefing with the Treasury.He says the briefing was “fundamentally about the causes of this volatility” – pointing to weaker-than-expected job numbers and underperformance in tech sector earnings in the US, and issues affecting interest rates in Japan.
My briefings with the Treasury are to understand the sources of this volatility. [To] understand the consequences for us in terms of our dollar, our own markets and any exposure [of the] economy to that kind of volatility.
But even before the last few days, it has been really clear to us – certainly through the course of this year – that in addition to the cost-of-living pressures which are coming at people from domestic sources, there is a big international element to the economic uncertainty that people are feeling.
ShareUpdated at 07.16 CESTNo national plan for publicly owned petrol stations following Queensland announcementThe treasurer was also asked to weigh in on the Queensland government’s plans to launch 12 state-owned petrol stations. Jim Chalmers says:
I welcome the fact that the state governments are prepared to play a role in easing some of these cost-of-living pressures that people are under.
We don’t have a similar plan nationally … but we do welcome the efforts of the Queensland government [and] other governments around Australia to help alleviate some of these cost-of-living pressures that we know people are under.
Asked if other states should follow suit, Chalmers says: “That’s a matter for them.”ShareUpdated at 07.17 CESTChalmers refuses to speculate about future rate movementsGiven that volatility, does Jim Chalmers believe the RBA will cut rates to ease some of that pressure?The treasurer says he wouldn’t make assumptions or predictions on future movements in interest rates:
There are good reasons why I don’t do that. I don’t pre-empt them before a decision, and I don’t try and predict future movements in interest rates.
Asked when there would be switch a from controlling inflation to stimulating growth, Chalmers says the government’s primary focus is on fighting inflation.
We have to strike a series of fine balances. I’m confident that we have [done that] in the budgets that we’ve handed town, and particularly that one that was handed down in May. There are a balance of risks in our economy – inflation, primarily – but we can’t ignore the challenges to growth.
ShareUpdated at 07.02 CESTStock market volatility ‘really important warning against complacency’, treasurer saysJim Chalmers is asked just how worried he is about the stock market volatility?
The volatility we’ve seen in international markets has been really substantial. Part of that has been unwound in Japan today, for example. But it’s another reminder of just how uncertain the global economic environment is.
We are confident about the Australian economy. We are confident we can continue to see inflation moderate, we’re confident that we can continue to grow. But this is a really important warning against complacency. The fact that we’ve seen this kind of volatility in international markets, and also the fact that we saw a much weaker jobs outcome in the US in the first place. And so we are confident, but not complacent, about Australia’s economic prospects.
ShareChalmers briefed on market volatility and will be ‘kept up to date on developments’The treasurer, Jim Chalmers, is now speaking to reporters after the RBA’s decision to keep rates on hold at 4.35%. He says:
Australians are doing it tough enough already, the last thing they needed today was more cost-of-living pressure, so this decision is welcome … I also think that having rates on hold now since November last year provides a bit more certainty to mortgage holders and small businesses who are already under pressure.
Stock markets around the world, including New York’s, are worried about a US recession. Photograph: Charly Triballeau/AFP/Getty ImagesTurning to market volatility, Chalmers tells reporters:
The market volatility that we’ve seen has been driven by a weaker-than-expected jobs growth and tech earnings in the US, as well as rising Japanese interest rates impacting Asian markets as well.
Australia’s not immune from these global developments. We’ve seen them play out in the Australian dollar and in our own share markets as well.
I’ve been briefed by Treasury today on this volatility, and I’ll be kept up to date on developments as they unfold.
ShareUpdated at 07.06 CESTSarah Basford CanalesReynolds recounts worry over media inquiry in October 2019Shortly before court was adjourned, Linda Reynolds described the worry she felt when a media inquiry came in about an incident at Parliament House in early 2019.The request came from a Canberra Times journalist in October 2019. Reynolds said she “immediately knew that it was related to the incident with Bruce [Lehrmann] and Brittany [Higgins]”.The journalist said they were going to run a story for the next day, Reynolds said.Reynolds arranged for her then chief of staff, Alexandra Kelton, to speak with Michaelia Cash’s then chief of staff, Daniel Try. Higgins had taken a job in Cash’s office as a media adviser shortly after the May 2019 federal election.However, the media inquiry never amounted to a story.Reynolds recalled asking Higgins when she left for the job in Cash’s office whether Reynolds should mention the incident to Higgins’ boss.“She looked aghast and said ‘absolutely not,’” Reynolds said.ShareUpdated at 06.51 CESTChalmers welcomes RBA decision to keep rates on holdThe treasurer, Jim Chalmers, has reacted to the Reserve Bank’s decision to hold interest rates, writing on X:
Today’s welcome decision to keep interest rates on hold recognises that Australians are under pressure, as well as the significant progress we’ve made on underlying inflation, softness in our economy and the substantial uncertainty and volatility around the world.
He is expected to front the media shortly.Treasurer Jim Chalmers. Photograph: Paul Braven/AAPShareUpdated at 06.46 CESTPeter HannamJust back to news the Reserve Bank has left its cash rate unchanged:The RBA said “[i]nflation in underlying terms remains too high, and the latest projections show that it will be some time yet before inflation is sustainably in the target range”.“Data have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out,” it said, maintaining a stance it has had all year.The Australian dollar rose slightly, to 65.15 US cents from 65 US cents just prior to the RBA decision. Stocks pared some of their modest gains of about 0.5% for the day, as investors viewed the accompanying forecasts as implying interest rates might have to stay higher for longer than thought.ShareUpdated at 06.43 CESTHiggins defamation trial adjourns after Reynolds complains of rising blood pressureSarah Basford CanalesThe defamation trial by Linda Reynolds against Brittany Higgins has been temporarily adjourned after the Western Australian senator complained of health conditions.Reynolds was recounting the series of events leading up to the publication of the Higgins’ alleged rape in Parliament House in February 2021.The Liberal senator was telling the court about how the Labor senator Kimberley Kitching, who has since died, approached her in the Senate chamber to let her know Labor had found out about the 2019 incident and was intending to “rain hell” on the senator and the Morrison government.While Reynolds said she did not consider Kitching a friend, she described her as a “trusted colleague”. Reynolds said Kitching had told her she had received an anonymous letter about the incident in the previous year and had passed it on to the AFP.Linda Reynolds arriving at court last week. Photograph: Richard Wainwright/AAPReynolds said she remembered feeling “a bit incredulous that [Labor] would even contemplate doing such a thing”.Justice Paul Tottle paused Reynolds for a moment to remind her not to interpret the emotions of others but to stick to what they said when she suggested Kitching’s decision to tell the AFP, over her colleagues, drew her Labor colleagues’ ire.Reynolds said she planned to meet with the then prime minister, Scott Morrison, to let him know and intended to speak with the then Senate president Scott Ryan.Reynolds paused to drink some water, saying she was losing her voice and she could feel her blood pressure rising. She said this memory was “particularly emotional” for her as it “led to Kitching’s death”.Justice Tottle said court would adjourn until Reynolds’ health improved.ShareUpdated at 06.54 CEST