Productivity Growth Constrained by Weak Economy, Says RBA Governor

Australia's chronically weak productivity growth is expected to constrain the economy's ability to grow without generating high inflation, according to Reserve Bank Governor Michele Bullock.

The RBA noted that its decision to keep interest rates steady for a second-straight meeting was due in part to the economy slowing as expected.

In its latest set of macroeconomic forecasts, the RBA downgraded its labour productivity expectation for 2026 from 0.2% growth to a fall of 0.5%, which is nearly a year after it slashed its medium-term productivity from 1% to 0.7%.

Bullock lamented that Australia's inflation objective essentially consigned the country to feeble economic growth, and stated that 'productivity outcomes have been weak for some time and continued weakness will constrain the economy's ability to grow without generating high inflation.'