The Reserve Bank of Australia’s (RBA) first-quarter announcement for 2024 revealed that consumer spending has been much less than the final quarter of 2023. This resulted in a higher rate of household savings, with the downside of the economy being less stable.
Chief Executive Officer of Westpac Banking Group, Peter King said, “The economic slowdown, combined with abating inflationary pressures, should provide scope for monetary policy to become less restrictive within the next year.”
Investment in businesses and public spending in the public sector have grown quickly. Spending on construction including software investment, has assisted in business growth.
The unemployment rate has remained moderately the same since 2022. Working hours have declined especially within the white-collar workforce.
“You will see that in the retail figures last week. Growth is subdued even though population growth is strong” reveals Michelle Bullock, governor of the Reserve Bank of Australia.
The RBA board considered rising interest rates, and after concluding a meeting, they felt that keeping interest rates where they are would be better for the public.
Michelle Bullock mentioned, “The board felt that at the moment, staying where they are was appropriate. We think that policy is currently restrictive. That doesn’t rule out that we mightn’t have to raise rates, but it doesn’t mean we will have to raise rates.”
The Reserve Bank has a high priority to reduce inflation within a certain time frame.
The RBA predicts that once inflation has decreased they also expect that higher job growth will result. Inflation is decreasing, although it is not dropping at the rate that the RBA would like. The bank’s board expects that the target inflation rate will not be set anytime soon.
Disposable income has been affected even after the surprising announcement of less consumer spending. Consumption spending in Australian households has become fragile, due to the high rate of inflation. The Australian public, especially those who are very much affected by high inflation, are cutting down on consumer spending by a large amount.