Reserve Bank Cautiously Optimistic About Inflation Drop

The Reserve Bank of Australia (RBA) has expressed tentative optimism following a notable drop in inflation. Governor Michelle Bullock has urged patience, stressing the importance of sustained progress.
The Australian Bureau of Statistics (ABS) reported that the Consumer Price Index (CPI) held steady at 2.1 per cent for the 12 months to October 2024, marking the lowest annual inflation rate since July 2021.
Governor Bullock acknowledged this milestone as a “welcome relief” for Australians grappling with rising living costs but highlighted the need for further improvement.
“This is welcome relief for people feeling the pinch from the rise in the cost of living over the past two years—which is everyone, but particularly the more vulnerable people in our community,” Bullock said during her address at the Committee for Economic Development of Australia (CEDA) Annual Dinner in Sydney on Nov. 28.
Bullock did not commit to any new timeline for a possible cut.
She added that while global central banks ease policies as inflation nears targets, Australia’s demand still outpaces supply, keeping financial conditions restrictive.
The RBA projects inflation to stabilise by late 2026, assuming the cash rate remains unchanged. However, the bank stressed this was a scenario, not a forecast, and policy adjustments would depend on new data.
“While these temporary factors have undoubtedly helped many Australians, our approach is to look through them to some extent to better understand where inflation will settle in the medium term,” Bullock explained.
Despite progress, she flagged that underlying inflation remains a concern, citing trimmed mean inflation, which stood at 3.5 per cent over the year to September—down from 5.1 per cent the previous year but still above the target range.
“At this current level, we are of the view that monetary policy is restrictive,” she noted.
Bullock also highlighted ongoing economic pressures, with demand outpacing supply in Australia’s tight labour market.
“This is another really encouraging sign our policies are helping to get inflation down after it was higher and rising under the Liberals,” Chalmers said, adding that inflation had stayed within the RBA’s target band for three consecutive months—a first in nearly five years.
However, opposition leaders remain critical of the government’s approach, arguing it has failed to adequately address cost-of-living pressures for everyday Australians.