Big news today is that the RBA board made some important decisions about the state of our economy. Basically, they decided to raise the target cash rate and interest rate on Exchange Settlement balances.

I know, I know, the thought of “interest rates” and “monetary policy” might sound boring, but trust me, it has a big impact on our lives.

Global inflation still on the rise

So, what’s going on? Well, globally, we’re still seeing some high inflation, but it’s starting to cool off as energy prices drop and monetary policy tightens up. But, it’ll still be a while before things return to normal. The outlook for the global economy is looking a little bleak, with lower than average growth expected in the next couple of years.

Here in Australia, inflation was pretty wild over the past year, reaching levels we haven’t seen since 1990. Part of this was due to global factors, but our strong domestic demand has definitely contributed too. The good news is that inflation is expected to come down this year as the economy slows down.

And speaking of the economy, we had a strong year in 2022, but the forecast for 2023 and 2024 is for slower growth. Lots of services are starting to pick back up now that COVID restrictions have lifted, but tighter financial conditions might make it harder for spending to keep up.

 

Top Australian Brokers

 

Uncertainty in the months ahead

The job market is pretty crazy right now, with unemployment rates at their lowest since 1974 and lots of job vacancies. However, some employers are starting to find it a little easier to hire workers. As the economy slows down, we expect unemployment to go up a bit, but wages are still on the rise.

Now, here’s where things might get a little tricky. The board knows that it takes some time for the full effects of these interest rate changes to take hold, and there are a lot of uncertainties about how this will all play out. Some people have savings to fall back on, but others might be feeling the squeeze of higher living costs and mortgage payments.

The board’s main priority is getting inflation back to a healthy level, which makes life easier for everyone and keeps the economy running smoothly. They’re determined to get inflation back to the 2-3% range, but it’s a delicate balance.

In conclusion

So, what does the future hold? The board thinks that we’ll likely see more interest rate increases in the coming months to help get inflation under control. They’re keeping a close eye on global trends, household spending, and the job market to make the best decisions for us all.

Overall, the board’s mission is to get us back to a healthy place, and they’re willing to do what it takes to get there, so fingers crossed for a smooth ride.