What to expect from the RBA meeting in June 2024

Speaking at an Australian senate estimates hearing, RBA governor Michele Bullock reiterated that when it comes to the cash rate and meeting the inflation target, the central bank is “not ruling anything in, ruling anything out.’

“The board will be driven by the data and the data will tell us if we need to move.”

Governor Bullock also indicated that we may not have seen the last of rate rises. For example, rebounding inflation and higher than expected price pressures could be potential signs that the RBA may need to raise interest rates again, for the fourteenth time since April 2022.

But the opposite is also true – Governor Bullock indicated that lower than expected economic growth could encourage the RBA to cut interest rates, due to the downward pressure that less growth could put onto inflation.

It’s worth noting that in the time since Governor Bullock appeared at the hearing, Australia’s national accounts were released by the Australian Bureau of Statistics (ABS), indicating that Australia’s economy grew by just 0.1% in the March Quarter – the lowest through the year growth since December 2020.

Federal Treasurer Jim Chalmers has acknowledged the current weakness in Australia’s economy, partially attributing it to a combination of higher interest rates, global economic uncertainty, and persistent if moderating inflation:

“But what we’ve seen over the last 12 months or so is the impact of these rate rises that are in the system. The rate rises began before the election and continued after, and you know – we’ve spoken about it before – that’s putting people under a lot of pressure, and it’s slowing the economy as well. There are some other factors too.”

However, the Treasurer has also noted that Australia’s inflation has moderated significantly since its 2022 peaks, and forecast that it could reach the RBA’s target band of between 2% and 3% by the end of this year.

ANZ still feels that the RBA will keep rates on hold in June 2024. However, it is now predicting that the cash rate won’t see cuts until February 2025 – a change from its previous forecast of by the end of 2024.

Why the change? According to ANZ head of Australian economics, Adam Boynton, it may take longer than originally anticipated to get the right level of supply and demand in the economy, partially due to strong government consumption supporting the economy.

“It’s not that monetary policy isn’t working. It is. The economy has clearly slowed, particularly across private final demand. It’s for this reason that we think a rate hike remains unlikely.”

From February 2025, ANZ is predicting a relatively shallow easing cycle of three 25-point cuts, or 75 points in total. This would bring the cash rate from 4.35% to 3.60% by the end of 2025.

Despite the slow economic growth stats from the ABS, Commonwealth Bank’s economists are sticking to their guns on the cash rate. In the bank’s eyes, the upcoming June 2024 meeting is not a ‘live’ one, and an easing cycle is still expected to commence from November 2024, though there’s a growing risk that this could move to a later start date.  

Commonwealth Bank head of Australian economics, Gareth Aird, described Australia’s slow GDP growth as being “by design and not default” as a counter to the economy running too hot coming out of the recent pandemic:

“The RBA’s highly aggressive rate hiking cycle has clearly worked to slow demand growth in the economy.  Rising mortgage payments along with a lift in tax payable and the effects of elevated inflation have weighed on household purchasing power. And the tailwind of pent-up savings on consumer spending has largely run its course.”

Mr Aird also noted that with the next RBA board meeting scheduled to take place in August 2024, this will give the RBA time to consider the Q2 CPI data due for release in late July 2024. This, along with labour market data will guide both the RBA’s decisions and Commonwealth Bank's forecasts.

NAB continues to expect that the RBA will keep rates on hold for the time being, with a cut expected by the end of the year. That said, the risk remains that rates could stay higher for longer if economic conditions don’t improve.

NAB chief economist, Alan Oster, has said that the results of a recent business survey conducted by the bank send a mixed message for the RBA:

“There are warning signs on the outlook for growth but at the same time reasons to be very wary about the inflation outlook, and we expect the RBA to keep rates on hold for some time yet as they navigate through these contrasting risks.”

Westpac is still saying that there will be no rate cut this month, but there will be a rate cut by the end of 2024.

Westpac’s chief economist, Luci Ellis, said that balancing supply and demand is the current challenge for the RBA, as “some of the supply disruptions related to the pandemic have taken a long time to unwind.”

“Monetary policy works by hammering down demand to make it in line with supply. In recent years, though, part of the issue is that the demand ‘nail’ is only sticking out because the supply ‘wood’ around it has been eroded away.”

Westpac economist, Stephen Coombes, previously wrote that the RBA is setting a “sufficiently restrictive” to avoid adding to inflation, without strangling the economy. By maintaining this stance for long enough, the supply constraints in the essential parts of the economy can hopefully be ironed out.  

“There is a risk that this supply improvement takes too long and forces the RBA’s hand, but there is equally a chance that supply recovers more quickly and inflation moderates faster.

To help you stay up to date with the latest changes to the national cash rate, as well as any adjustments to interest rates for home loans and savings accounts that follow, be sure to visit the RateCity RBA Rate Tracker hub.