Australia's RBA expects fall in inflation to be more gradual

“We expect inflation to continue to decline, but more gradually than anticipated three months ago. Higher interest rates are working to help establish a more sustainable balance between supply and demand across the economy, which is expected to support the return to low and stable inflation,” he told the Australasia Conference, organised by UBS, a multinational investment bank and financial services company with its headquarters in Zurich.

Australia’s gross domestic product (GDP) growth expected to be below trend over the year ahead. This is mainly because of subdued growth in household consumption as cost-of-living pressures, higher interest rates and higher tax payable all continue to weigh on disposable incomes for a time, he said.

The labour market remains quite tight across a range of dimensions, he noted.

The economy has evolved more or less as expected by its government a year ago. GDP growth has slowed, labour market conditions have eased a little and headline inflation has fallen from its peak of close to 8 per cent in late 2022 to just under 5.5 per cent in the most recent data.

This fall was driven by lower goods price inflation as global supply chain issues improved. However, inflation is still too high and underlying inflation is higher than expected a year ago. This reflects strong domestic cost pressures and a still-robust level of aggregate demand, the central bank official observed.

Fibre2Fashion News Desk (DS)