May 2nd 2023

Hey there!

We hope you're doing well. We wanted to give you a quick update on some recent changes in Australia's monetary policy. Don't worry if finance isn't your strong suit - we'll break it down in simple terms.

On May 2nd, 2023, the Reserve Bank of Australia (RBA) decided to bump up interest rates by 25 basis points, which means the cash rate target is now at 3.85%. They also increased the rate paid on Exchange Settlement balances by 25 basis points to 3.75%.

Why are they doing this? In short, it's because of inflation. Although it's not as high as it was recently, it's still too high at 7%. It's going to take some time for inflation to get back to the RBA's target range, so they're taking action by raising interest rates.

Last month, the RBA held off on changing rates so they could have more time to see how things were going. They found that while goods price inflation is slowing down (thanks to the end of pandemic disruptions), services price inflation is still pretty high. With labor costs also rising, they figured it was time to make a move.

Australia's job market is super tight right now, with unemployment at a near 50-year low. This means many businesses are struggling to find workers. The RBA's main goal is to get inflation back on track, so they're keeping a close eye on wages, prices, and how firms set their prices.

In the meantime, they're trying to keep the economy steady as inflation gets back to the target range of 2-3%. It's a bit of a balancing act, but they're working on it. The economy is expected to keep growing, but at a slower pace than before. Unemployment is forecasted to rise a bit by mid-2025.

There's still some uncertainty around household spending, as higher interest rates and cost-of-living pressures are causing people to cut back. The global economy is also a bit of a wildcard, with slower-than-average growth expected over the next couple of years.

In conclusion, the RBA might have to tighten monetary policy even more to get inflation back on track, but they'll be keeping a close eye on the economy, household spending, and the global market. They're determined to get inflation back to target and will do what it takes to achieve that.

That's it for now! If you have any questions or need help understanding how these changes might impact you, feel free to reach out to us. We're always here to help!

Take care and talk to you soon!

Max Pisano

max@mpproperty.com.au

0418378900