‘Inflation is still too high’: RBA reveals why rates are unlikely to be cut in 2024

The RBA’s deputy governor Andrew Hauser has made a big call on the likelihood of a 2024 rate cut for Aussies.

Rates in Australia are likely to remain higher for longer, as the Reserve Bank of Australia favoured a lower unemployment rate over crushing the cost of living crisis.

RBA deputy governor Andrew Hauser used his “fireside chat” format at the CBA Global Market Conference in Sydney, to reaffirm homeowners shouldn’t expect an early Christmas gift in the form of rate cuts.

He said the RBA was focusing on its dual mandate of keeping prices stable at 2 to 3 per cent while also supporting full employment.

“It was a deliberate choice for us to not to tighten as much to protect employment gains, with a recognition that not tightening as much that inflation would take longer to come back and that rates would not fall as much or as early as it has in other countries,” Mr Hauser said.

While acknowledging the RBA has received flak for its strategy, Mr Hauser said stronger than expected job figures were welcomed by Australia’s central bank.

Reserve Bank of Australia deputy governor Andrew Hauser confirms it has supported the labour market at the cost of rates. Picture: NewsWire / Max Mason-Hubers

The RBA has held rates at 4.35 per cent for 11 months in a row, after lifting the official cash rate 13 times between May 2022 and November 2023.

Most recently Australia’s job market came in surprisingly strong with the addition of 64,100 jobs according to September figures released by the ABS.

Despite the slight fall in the number of unemployed people, the strong rise in employment saw the participation rate rise by 0.1 percentage point to a record high of 67.2 per cent.

Mr Hauser said the RBA had taken a unique path when it came to fighting inflation, and would not simply cut rates in line with the US Federal Reserve or The Bank of England.

“The reason we are not cutting rates at the moment compared to other central banks is because inflation is still too high,” he said.

A job is a job

The RBA deputy governor also confirmed the central bank looked at all jobs similarly, despite Australia’s productivity falling in recent years.

Productivity growth, a key driver of economic growth and higher living standards, has slowed in Australia to 0.8 per cent in the June quarter, resulting in annual growth of just 0.5 per cent, according to the Productivity Commission.

A big part of the problem is Aussies are now getting jobs in education and healthcare, industries that are not counted as part of the figures.

Acknowledging the issue, that employees are going into unproductive jobs and firms are struggling to secure the people they need, Mr Hauser was still bullish on the overall job market.

Jim Chalmers is bullish on the current employment figures: NewsWire / Glen Campbell

“Basically a job is a job, it is a claim of resources in the economy ,” Mr Hauser said. “On average, while firms are telling us that labour factors are becoming easier it is still the top factor in constraining outlook growth.”

Australia’s major political parties have taken opposite stances on the type of work Aussies are engaging in.

Jim Chalmers hailed the recent jobs figures as a sign Labor’s economic plan was working, highlighting it was the first time a federal government had created one million new jobs in a single parliamentary term.

“More than a million new jobs in one parliamentary term is a pretty remarkable achievement in a slowing economy and it means more new jobs have been created on our watch than any other government at any time,” the Treasurer said.

Opposition employment spokeswoman Michaelia Cash said the growth in public sector roles was “not sustainable”.

“In the 2½ years under this ­government, you have seen an increase in the rate of jobs growth in the public sector,” Senator Cash said.

“That’s just the government increasing the size of the ­bureaucracy. The Albanese government is all about increasing the size of the public sector, while attacking the private sector with red tape and uncertainty.”

Originally published as ‘Inflation is still too high’: RBA reveals why rates are unlikely to be cut in 2024