MNI BRIEF: RBA Forecasts GDP Slowdown

The Reserve Bank of Australia forecasts near-term GDP growth to slump – growing just 0.9% y/y in Dec. 2023, down from the previous 1.2% forecasts and the current 2.3% rate, according to the Statement on Monetary Policy released today.

The RBA noted the softer growth reflected the subdued gains in household consumption “as higher interest rates and cost-of-living pressures weigh on real disposable income.”

The central bank largely kept its inflation forecasts unchanged – headline inflation will fall to 4.1% by the end of the year and 3.3% by the end of 2024. The unemployment rate, currently at 3.5%, will rise to 3.9% by the end of the year and 4.5% by mid-2025, in line with the RBA’s previous forecast.

The statement also showed the RBA considered increasing the cash rate to 4.35% at its most recent meeting due to high services inflation. The Reserve kept the rate unchanged on Aug. 1 at 4.1%. (See MNI RBA WATCH: RBA Pauses With Tightening Bias)