RBA Eyes Rate Hike as Economic Growth Data Looms

The Reserve Bank of Australia is set to consider another rate hike as it awaits economic growth data from the Australian Bureau of Statistics. The release of national accounts figures on Wednesday will be a crucial milestone for the bank, which has already tightened monetary policy in response to hot inflation data.

According to Westpac senior economist Pat Bustamante, GDP growth is expected to slow to 0.2% in the June quarter, down from 0.3% in the previous quarter. However, the annual rate remains at a relatively healthy 2.5%, above the RBA's assumption for how fast the economy can grow without fueling inflation.

Bustamante expects the annual rate to slow to 1.7% year-on-year, which might not be enough to convince the RBA that sufficient spare capacity is opening up in the economy to control inflation. Household spending grew at its fastest rate since the series began in 2023 in July, while Westpac activity data shows strength continuing through early August.