Reserve Bank of Australia (RBA) officials expressed greater confidence in their strategy amid diminishing upside risks to inflation, according to November's meeting minutes released on Tuesday.
RBA officials noted that recent data had not materially altered forecasts for inflation or the labour market, aligning with the Board's plan to return inflation to the target range while safeguarding employment gains.
In addition, the risks of inflation returning to target more slowly than anticipated had lessened since their previous meeting. This was attributed to weaker GDP growth over the year to the September quarter and subdued private consumption.
The Board also observed slower-than-expected wages growth, noting that "it was possible for wages growth to slow even when employment was above its full employment level, so long as the labour market was moving towards better balance and inflation expectations remained anchored”.
The Board noted that Australia’s cash rate remained lower than those of several other advanced economies, where central banks have begun easing rates.
Nonetheless, global monetary policy conditions appeared more contractionary elsewhere compared to Australia.
Despite reduced inflation risks, the RBA expressed concerns about weaker private demand and a potential rise in the unemployment rate if labour demand in the non-market sector slowed abruptly.
While officials judged that inflation risks had diminished, they emphasised it was too soon to conclude that inflation was sustainably returning to the target.
"Members noted uncertainties over the level of policy restrictiveness. A number of measures of financial conditions had loosened somewhat over prior months and there were indications that financial conditions were not restraining credit growth as much as had been expected.”
