RBA Lifts Cash Rate Target Amid Strong Labour Market and Rising Inflation

The Reserve Bank of Australia (RBA) has lifted its cash rate target to 4.60%, citing a tightening labour market and rising inflation. Despite the unemployment rate increasing from 3.5% to 4.6% over the past couple of years, Governor Michele Bullock says the jobs market remains historically strong.

Bullock attributed the rise in unemployment to the labour market moving back towards balance after being overly tight at 3.5%. This tightening was causing inflationary pressures due to employers competing harder for staff and bidding up wages or prices.

The RBA had anticipated some loosening in the jobs market as higher interest rates slowed demand, and this has happened roughly on schedule. However, other forces are keeping inflation too high, including stronger-than-expected recent inflation outcomes, cost pressures faced by firms, and global energy price increases.