The RBA’s move to cut rates today is the third time the official cash rate has been chopped in 2019 and a sign that the broader economy is struggling, according to realestate.com.au chief economist Nerida Conisbee.
“There are a number of problems in the economy that aren’t being resolved quickly using monetary policy. The big one is the rising unemployment rate and resulting weak wages growth,” she says.
“The Australian economy remains lacklustre and there was a slight lift in the unemployment rate in August to reach a 12 month high. This has led to the RBA cutting rates in October.”
While there have been improvements in the housing market, the Board is looking to increase economic activity and get consumers spending again, according to Governor Philip Lowe.
“The Board took the decision to lower interest rates further today to support employment and income growth and to provide greater confidence that inflation will be consistent with the medium-term target.
The economy still has spare capacity and lower interest rates will help make inroads into that “It is reasonable to expect that an extended period of low interest rates
will be required in Australia to reach full employment and achieve the inflation target.
The Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further
if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time,” he says.
Inflation pressures remain subdued and this is likely to be the case for some time yet. In both headline and underlying terms, inflation is expected to be a little under 2 per cent over 2020 and a little above 2 per cent over 2021