Identify the decision of the Reserve bank board on 1/8/23 §

• Cash Rate Target unchanged at 4.10%
• Exchange Settlement balances unchanged at 4%

Explain how the reserve bank isjustified in their decision §

• The RBA wants to wait for the Long effect lag of monetary policy to excerpt some of it’s impact before making further decisions

Inflation §

• Headline Inflation in general is declining but still too high at 6%.
• CPI Inflation has continued to decline, expected to be 3.25% by the end of 2024, and within 2-3% range by late 2025
• Rent Inflation elevated
• Services are still increasing in price “briskly”

State of the Economy §

• Growth is slowing, central forecast for GDP growth is around 1.75% over 2024, and little over 2% in 2025
• Household Consumption is weak
• Dwelling Invest is weak
• Labour Market is still tight
• Lots of job vacancies
• Unemployment expected to grow from 3.5% toaround 4.25% by late next year - Moving from above full employment, to below full employment (labour market will be more employer focused)
  • Wage Growth rising
    • Still only consistant with inflation (if productivity increases)

Outline why further tighting of MP may be necessary §

Depdnign on trends in the

• Household spending
  • Increases may require tightening
• Outlook for Inflation
• Labour Market

Talk about RBAs Economic Objectives, normally og through and describe the Transmission Mechanism (describing the 4 channels)

On the economy,

• Macro-economic Objectives
  • Employment
  • Economic Growth
  • Economics Growth
• Complementary Governmental Policy (maybe)
  • Fiscal Policy