The Reserve Bank of Australia (RBA) is in a good position to lower interest rates further if changes in economic conditions badly affect Australia, RBA Governor Michelle Bullock said.
Answering questions from a parliamentary committee, she the RBA had “room to move” if the world trading system badly impacted China and, therefore, Australia.
“We've got pretty a strong labour market still, inflation is back in the (target) band, the interest rates is still at 3.6% and therefore we've got room to move if we need,” she told the House of Representatives Standing Committee on Economics.
In her opening statement, Bullock said the RBA’s Board’s strategy had been to sustainably lower inflation to its 2% to 3% target range within a reasonable timeframe while allowing the jobs market to adjust gradually towards full employment
She said inflation had fallen substantially since the peak of 7.8% in 2022 to within the target range due to higher interest rates, with underlying inflation falling to 2.7% in the year to June and headline inflation to 2.1%.
The official cash rate has been cut by 75 basis points to 3.6% this year after being held steady since November 2023.
Labour market conditions were close to full employment with the jobless rate low by historical standards at 4.2% in August, but “some tightness” remained in the market.
Bullock said the recent rate cuts were expected to support household and business spending, and Australian economic growth was expected to pick up a little further over the next year.
“Since the August meeting, domestic data have been broadly in line with our expectations or if anything slightly stronger – the Board will discuss this and other developments at our meeting next week,” Bullock said.
“And the economic outlook continues to be clouded by uncertainty. This is especially so the further into the future we look. So we need to be alert to the risk that circumstances may change and be prepared to respond if necessary.
“We’ve made real progress in bringing inflation down. But our job is to make sure it stays within the target range in a way that’s sustainable – not just for now, but for the long term.”
