Welcome to this month’s Dominion Finance newsletter.
We are excited to announce that we have moved to our new office at Level 1, 221 London Crt Canberra City.
Our new office is brighter and more modern, and we are confident that it will provide a better experience for us and our clients.
Reserve Bank of Australia keeps cash rate on hold
The Reserve Bank of Australia (RBA) has kept the cash rate on hold at 4.10% for the third consecutive month.
The RBA said that it is aware of the rising cost of living, but it is confident that inflation will ease in the coming months.
The most recent Consumer Price Index (CPI) figures released by the Australian Bureau of Statistics (ABS) revealed that the CPI indicator rose 4.9 per cent in the 12 months to July 2023, down from 5.4 per cent in June 2023 and the lowest annual reading since February.
A cash rate of 4.10% is in line with historical averages. It is expected to remain at this level for the foreseeable future. See below a graph of the cash rate since 1990.
The RBA board said that it is “committed to returning inflation to its target range of 2-3% over time”. However, the board noted that “inflation is expected to peak later this year and then decline over the next two years”.
The RBA also said that it is “mindful of the impact that higher interest rates can have on household budgets”. The board said that it will “continue to assess the evolving outlook for inflation and the economy” when making future decisions on the cash rate.
See below the inflation rate since 1960
Inflation is high due to a combination of factors.
- Strong economic recovery: The Australian economy has recovered strongly from the COVID-19 pandemic, due to strong stimulus measures by the Government.
- Supply chain disruptions: The COVID-19 pandemic caused disruptions to global supply chains, and although these have eased, demand and consequently prices are still impacted
- Increased energy prices: The price of electricity, oil and gas has risen sharply in recent months. This has put upward pressure on the prices of many goods and services, as energy is a major input cost for many businesses.
- The war in Ukraine: The war has disrupted global food and energy markets, pushing up prices.
New RBA Governor Michelle Bullock commences on 18 September 2023
Michelle Bullock will commence as the new Governor of the Reserve Bank of Australia on September 18, 2023. She is the first woman to hold this position.
Ms. Bullock has been with the RBA for 39 years, and she has held a number of senior positions, including Deputy Governor. She is a highly respected economist and central banker.
Australians should be reassured that the RBA has people like outgoing Governor Philip Lowe and incoming Governor Michelle Bullock, who have dedicated their careers to managing the Australian economy.
Until next month, thank you for your continued support and enjoy this beautiful spring time weather.
At its meeting today, the Board decided to leave the cash rate target unchanged at 4.10 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.00 per cent.
Interest rates have been increased by 4 percentage points since May last year. The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so. In light of this and the uncertainty surrounding the economic outlook, the Board again decided to hold interest rates steady this month. This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook.
The information provided in this newsletter is general in nature and does not take into account your personal circumstances, needs, objectives or financial situation. This information does not constitute financial advice. Before acting on any information in this newsletter, you should consider its appropriateness in relation to your personal situation.