2 days Ago By Jacob Shteyman
Treasurer Jim Chalmers has downplayed hopes of a second successive interest rate cut, mirroring market expectations that a new monetary policy board will stick with the status quo. or signup to continue reading The new board, which met for the first time on Monday, includes Australian National University professor Renee Fry-McKibbin and former Bendigo and Adelaide Bank boss Marnie Baker. They are tipped to join other board members in keeping the cash rate on hold at 4.
1 per cent when the two-day meeting concludes. "Almost nobody in the market expects there to be an interest rate cut tomorrow, so we're up front about that," Mr Chalmers said in Brisbane on Monday. Labor had made "substantial progress" on inflation, which was above six per cent and rising when it came to office, he said.
"We got new numbers last week which said that inflation is 2.4 per cent and underlying inflation is 2.7, so well within the Reserve Bank's target range," the treasurer said.
"The progress that we've made in the last three years ...
is inflation is down, real wages are up, unemployment's low, debt is down, interest rates have started to come down and growth is rebounding solidly in our economy as well." A monthly inflation indicator released last week will encourage the central bank board that price growth continues to track downwards, but economists and the market are largely convinced a cut is off the cards, following a drought-breaking 25 basis point cut in February. After the coalition accused the government of trying to stack the board with Labor-aligned appointees in the process of setting up the new board, the meeting comes at a politically charged moment - the first week of a federal election campaign.
HSBC chief economist Paul Bloxham expects the board to deprive the opposition of ammunition to launch another political broadside. "By cutting in February, and delivering strong guidance not to expect another near-term cut, the RBA has largely taken itself out of the national economic discussion as the electoral process plays out," he said. The board will want confirmation in quarterly CPI data at the end of April that underlying inflation is firmly back in its 2-3 per cent target band before delivering another cut, said RBC Capital Markets chief economist Su-Lin Ong.
"Having cut rates in May and jawboning against market expectations of multiple cuts, the case for a follow-up cut ...
is not particularly compelling," she said. The RBA will want to see more global data and developments to try and gauge the impact and risks to Australia from rising global protectionism, Ms Ong said. "Staying low during an election campaign is preferable.
" With the market rating the chance of a cut at less than 10 per cent, the focus will be on any changes to the RBA's rhetoric in its post-meeting statement and from governor Michele Bullock in her press conference, said ANZ head of Australian economics Adam Boyton. "Overall, we think the tone and language of the statement will not pre-commit the board to a May interest rate cut," he said. Advertisement Sign up for our newsletter to stay up to date.
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