The Reserve held its first two-day meeting in February,after which it surprised financial markets and economists bywarning that it could still lift interest rates. The cash rate has been increased by 4.25 percentage points since May 2022,putting up repayments on a $600,000 mortgage by almost $1500 a month.
But since that meeting,inflation and household consumption have slowed and signs have started to emerge that the jobs market is softening. TheDecember-quarter national accounts showed the economy expanding by just 0.2 per cent,with per capita growth negative for the past nine months.
Before its twice-a-year outlook conference this week,Oxford Economics Australia’s head of macroeconomic forecasting Sean Langcake said the country was enduring a policy-induced slowdown,with both interest rates andbudget spending restraint hitting households.
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He said while the impact of both was close to peaking,the economy was being held up by population growth,which was adding to underlying demand.
“We expect strong population growth will ensure that Australia stays out of recession,” he said.
“But policymakers will need to walk a fine line to ensure cost-of-living pressures do not overwhelm vulnerable households,inflation returns to target in a timely fashion,and the labour market remains close to capacity.”