The Reserve Bank of Australia (RBA) announced on November 5 that it will keep the cash rate target unchanged at 4.35%, marking the eighth consecutive month without a rate change and maintaining rates at a 13-year high.
The statement noted that while inflation has been gradually receding from its 2022 peak, with the annual inflation rate for the September quarter falling within the RBA’s target range of 2–3%, the central bank remains vigilant about potential upward risks to inflation. According to the RBA’s latest forecast, inflation is expected to return to the target range by the end of 2025 and align closer to the midpoint by 2026.
The restrictive monetary policy has led to a decline in economic activity over the past year; however, the labor market remains resilient, with unemployment still near a historic low of 4.1%. The RBA expects consumer spending to pick up in the latter half of the year, though slower-than-expected growth in this area could further dampen economic expansion and potentially strain the labor market.
Additionally, the RBA highlighted uncertainties in the global outlook, particularly with respect to geopolitical risks. If the protectionist Trump camp were to win the upcoming U.S. presidential election, it may impose high tariffs on China’s imports. Given that China is Australia’s largest trading partner, this could have a significant knock-on effect on Australia’s economic growth prospects.
While most Western economies have already entered a rate-cutting cycle to support or reinvigorate economic growth, the RBA has shown a strong commitment to waiting until inflation visibly recedes. This resolve has prompted the market to push back expectations for the RBA’s first rate cut from February to May.