Statement on Monetary Policy – November 2024

In Brief

Headline inflation has fallen, but underlying inflation is still too high. The cash rate will stay restrictive until the Board is confident that inflation is moving sustainably to the middle of our 2–3 per cent target range.

What is going on in the economy?

Underlying inflation remains too high.

Part of the recent decline in headline inflation is expected to be temporary, and headline inflation is expected to increase again as cost-of-living relief unwinds. Underlying inflation, which is a better guide to inflation momentum, is easing more slowly. The labour market remains tight and total demand for goods and services still exceeds supply. But the gap between demand and supply is narrowing and inflation is coming down slowly.

How do we see the economy developing?

Economic growth is expected to recover.

The recovery in GDP growth is expected to come a little later than forecast in August, but household spending is still expected to increase as real incomes rise in response to tax cuts and easing inflation. Growth in Australia’s major trading partners is expected to be moderate, but we have revised our 2025 forecasts a little higher after an economic stimulus package was announced in China.

Labour market conditions are tight and are expected to continue to ease gradually.

The unemployment rate is expected to rise over the coming year as overall labour demand and supply comes roughly back into balance. Wages growth is expected to continue to slow gradually over this time.

Inflation is expected to reach 2.5 per cent by late 2026.

Underlying inflation is expected to ease slowly as demand in the economy moves back into line with supply. While headline inflation is expected to be in the target range in the first half of next year, part of this is due to temporary cost-of-living relief.

The outlook is highly uncertain. On the one hand, if conditions in the labour market are stronger than expected and productivity growth remains weak, this could slow progress in bringing inflation to target. On the other hand, household spending might not increase as quickly as expected, which could mean that inflation returns to target faster. Heightened geopolitical risks and potential changes to trade and fiscal policies abroad add to this uncertainty.

What did the Board decide?

At its November meeting, the Board decided to leave the cash rate unchanged.

Today’s decision will support inflation returning to target and balances the two objectives of monetary policy – price stability and full employment.