RBA Governor Michele Bullock says Australia’s economy is strong, and lower inflation with steady jobs allows the central bank to cut interest rates again if needed.
The central bank reduced interest rates slowly, so it can act quickly if sudden changes in the global economy affect the country’s growth. Bullock said the RBA must be alert because even if the current state of the economy is decent, risks from China and uncertain global trade could sour the mood.
RBA warns global risks may slow economy
Governor Michele Bullock said that households have started spending more and companies are increasing their investments because of the recent cuts in interest rates. She explained that the local economy is holding up well because the August meeting data were stronger than the bank had expected. However, she also noted that events outside Australia can still affect jobs, spending, and growth.
Bullock told lawmakers that the Reserve Bank Board will meet the following week to review the newest data and see whether the current state of the economy can handle external problems. She reminded them that Australia can still be affected by the growth of other countries because it relies on global markets for trade and finance.
Bullock also talked about the risks inside the country. She said there will be fewer jobs and lower incomes for many people if businesses make fewer sales because families don’t spend as much as expected. This chain of events can push both inflation and employment lower than what the Reserve Bank considers healthy. She said policymakers must therefore monitor local and international data before making any changes.
Central bank plans more rate cuts if needed
The Reserve Bank of Australia (RBA) has already lowered interest rates three times this year. The first cut was in February, the second in May, and the last in August, which lowered the main cash rate to 3.6 %. At that time, the RBA confirmed that the reduction was due to a downgrade in the country’s annual economic outlook.
As earlier reported by Cryptopolitan, the Reserve Bank of Australia also expects lower economic growth for the year at 1.7% from its previous estimate of 2.1%.
The central bank made each cut gradually to see how the economy reacted before making the next step. The results relieved households and businesses without causing sudden changes that could affect their confidence.
Governor Michele Bullock told lawmakers she believes the RBA is in a good position because inflation is now falling back into the 2 to 3% target band. At the same time, most people who want to work can find jobs because unemployment remains low at 4.2%. She also said next year’s economy will likely grow because of stronger incomes and higher investments by businesses in their operations.
Bullock pointed out that Australia’s biggest trading partner, China, is a concern, and said that the sales of iron ore, coal, and other major exports could fall if Chinese demand weakens.
She also warned that investors and companies are less likely to spend money or create jobs because the global trade is generally weak and financial markets are unstable in many countries. For these reasons, she stressed that the Reserve Bank must always be on high alert to react quickly and protect Australia’s economy if things overseas worsen.
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Source: https://www.cryptopolitan.com/australias-economy-holds-firm/