RBA Deliberately Slowing Economy, Aims for Soft Landing

The Reserve Bank of Australia (RBA) has made it clear that it's deliberately slowing down the economy, according to Assistant Governor Michelle Hunter. In a recent statement, Hunter emphasized that below-trend growth is not an unintended consequence of the RBA's tightening policy, but rather its intended outcome.

Hunter described the housing market as an important transmission mechanism for monetary policy, allowing higher interest rates to flow through to broader economic activity. However, she also pushed back on the conventional wisdom that house price movements have a significant impact on household spending, stating that changes in house prices have only a small effect on consumer spending.

This comment suggests that the RBA views the housing channel as working more through activity and construction than through direct hits to consumer spending. Despite its explicit goal of cooling the economy, Hunter reassured that the RBA does not expect a recession to develop, instead aiming for a softer economy relative to trend.