And that is it until the House sits on Tuesday – if that works for you?

Thank you so much for joining us as we waded through what we all knew was about to happen – it can always be a drag following along with the predictable.

Next week the house sits, and it is also senate estimates – which we will bring you, so hopefully we will see you there?

As always, you can catch me on the socials, or on email – but until then, take care of you. Ax

And the press conference ends – that is the RBA done for another meeting.

Michele Bullock points out that many people are not spending the three interest rate cuts but instead are using them to pay off their mortgages faster. Lower interest rates only stimulate the economy if the money is spent.

This is likely because people have been scarred by the big increases in prices and higher mortgage rates. Many were caught out and faced real financial pain. Now that real wages are growing again and they are not facing as much financial pain, they don’t want to loosen their belts and spend. Why? Because they want to build up a buffer in case something like this happens again.

Bullock gives an interesting (if a bit nerdy) note on the new monthly CPI that will begin in November:

“From November we are getting a full monthly CPI rather than a partial indicator which we’ve got at the moment. And I want to say that’s great news every nearly every other country in the world has a monthly CPI I think, or advanced economies. So this will bring us in line with that. So that’ll be great.”

But!!!

A couple of points though when it comes in the monthly CPI will be more volatile than the quarterly. It just will because it’ll be monthly data rather than quarterly data. Second point is that the monthly Outtrim mean is not calculated in the same way the quarterly trimmed mean is. Our focus is the quarterly trimmed mean. We think that’s the best measure of underlying inflation. So our focus will not be on the monthly trimmed mean we’re not going to be focusing on that.”

So don’t expect much change in how the RBA goes about making decisions even when we get more regular inflation figures.

Michele Bullock begins her press conference by basically reading out the board statement. 

Then the questions start. 

She tells Reuters that she “think the economy still is in a good spot”. 

And then to a journalist form Newswire who oddly seems to be concerned that prices are not going to go down that “the fact is that prices have risen and their staying up there permanently. We’re not going to see a decline in we don’t want to see deflation. Deflation is not good for businesses.” This is quite correct – prices falling across the board is Great Depression time. The key is to ensure wages are able to rise in such a way as to recover the lost living standards. 

Unlike in the previous meeting, today Bullock is not giving any forward guidance on whether rates will likely go down or stay steady (which really means they will stay steady)

Bullock then says that she thinks the current interest rate is “probably a little bit restrictive” – ie she thinks the current cash rate is slowing the economy (causing unemployment to rise). She then adds “So how restrictive are we at the moment? I don’t know. So we’re really that’s why we have to be data dependent. We have to see what the outcomes are looking like, what the forward looking indicators are telling us and what our forecasts are telling us.” And I guess it is good to hear the Governor of the Reserve Bank admit that she doesn’t know how much the setting of interest rates is slowing the economy, but also a bit concerning. It does however highlight that those going around thinking economic policy is a precise activity are very much wrong. 

So, can we expect the RBA to look at decreasing rates before the end of the year? Michele Bullock says “it depends”.

It’s all depended on the particular meeting. And I think what you’re referring to was the July meeting when we didn’t move. And I think at that meeting what I said was people were thinking the next move was probably down, but it was a question of timing. So they were sort of meeting specific comments, I think in that particular context, in terms of what people should expect now, I’m not going to give forward guidance.

I think I’ve said that a number of times, but what I would say is that today we felt given the evidence we had the were reasonably balanced, that there had been a bit of an upside surprise on some of the data, the inflation and the activity data. And I should say that’s good news. It’s good news that activity is responding.

So I don’t want anyone to think that’s bad news, but it just makes us think, well we’ve got another. It was a good decision today to hold. We’ll have more information available in November and we’re looking forward. We’re trying to see where this might take us in terms of inflation and employment. And then we can make a decision in November.

So we’ll make that decision in November about whether it’s down again or maybe it’s hold again. And if the economy is continuing to recover that’s really good news.

The RBA Governor is also reiterating that consumers can not expect to see prices fall, just because inflation has.

Bullock:

The fact is that prices have risen and their staying up there permanently. We’re not going to see a decline in we don’t want to see deflation. Deflation is not good for businesses. It’s not good for making investment decisions. That’s why low and stable inflation is best when it’s in the background and it isn’t influencing decisions. But I’m just want people to understand that when we’re lowering inflation, that doesn’t mean we are lowering the price level. We’re lowering the rate at which prices are increasing.

Michele Bullock is feeling OK about the overall economy though (no one tell Ted O’Brien)

I mean, we have inflation basically in the 2 to 3% range. The unemployment rate is holding at around 4.2. We expect it will drift up a little bit, but we still expect it to be relatively low compared with history. The monthly data are volatile, but a couple of components. We’ve got two months now of the quarterly number and a couple of components. A market services and housing inflation were a little more a little higher than we’re expecting. So we’re just being a little bit cautious about that. It doesn’t I don’t think suggest that inflation is running away. But we just need to be a little bit cautious.

Michele Bullock is holding her press conference and says that monetary policy is doing its job, but the RBA is worried about some of the lag of the earlier rate rises (it takes time for the impacts of rate cuts to flow through to the economy)

Here is her opening statement:

On balance, domestic data since the August meeting have been in line with or a little stronger than what we’re expecting in our forecasts. The labour market remains solid, and although employment growth has been slower in recent months, we judge it’s still a little tight relative to full employment. Inflation remains within the target range, but recent data indicate there could be a bit more upward pressure than we thought, in August.

The June quarter national accounts also gave us a bit more confidence that recovery in the private sector demand, particularly household consumption, is progressing as we expect in our August forecasts, we expected global growth to slow, partly reflecting the impact of tariffs and changing trade flows.

Since then, there has been some weaker than expected data from China, but the trade volumes have held up and it’s still expected that the authorities would provide support if needed. Data from the United States has been more mixed with weak employment data, but relatively strong activity data.

The board sees the risks as broadly balanced and it remains data driven by the next meeting in November, we’ll have more data on the labour market and inflation data for the September quarter. We’ll also have some more forward looking indicators, including from liaison and an updated set of forecasts.

We know that high inflation has pushed up prices across the board over the past few years. And while inflation has fallen a lot, the price level isn’t coming back down and this higher price level affects everyone. And it’s been especially tough on people of lower incomes and the more vulnerable. This is why it’s so important to keep inflation low and stable and unemployment as low as possible.

Grogs is going to watch Michele Bullock at the RBA press conference, so you don’t have to.

Thank you, Grogs.