Cherelle Murphy, chief economist at EY, noted that the RBA remains vigilant regarding inflation due to a strong labor market, poor productivity, and high government spending.

On November 5, 2024, the Reserve Bank of Australia (RBA) decided to maintain its key interest rate at 4.35% for the eighth consecutive meeting, signaling a commitment to a restrictive monetary policy amid persistent inflation concerns.

Despite a decrease in headline inflation to 2.8% in the third quarter, underlying inflation remains elevated at 3.5%, prompting the RBA to emphasize the need for a sufficiently restrictive monetary policy until there is confidence in a sustainable move towards the target range.

The RBA's recent statement indicated that while inflation fell within its annual target range, it still exceeds the desired levels, with expectations that achieving sustainable targets may not occur until 2026.

Australia's unemployment rate is currently at 4.1%, reflecting a strong job market with over 430,000 jobs created in the past year, despite minimal economic growth.

The labor market has remained robust, with the unemployment rate stable between 4.0% and 4.2% since April 2024, showcasing resilience amid economic challenges.

Major Australian banks, including ANZ and Westpac, predict no change in interest rates for the remainder of 2024, but anticipate a potential rate cut in February 2025.

Analysts from ANZ do not expect discussions on increasing the cash rate at the November meeting, nor do they foresee imminent rate cuts, although they acknowledge that the threshold for such cuts is approaching.

RBA Governor Michele Bullock has stated that rate cuts will only be considered once inflation sustainably falls within the target range, which she anticipates could happen within the next two years.

The Australian Council of Trade Unions has called for a rate cut, arguing that high rates hinder economic recovery and attributing inflation to temporary factors rather than wage growth.

The Australian dollar has weakened amid expectations of a less aggressive RBA, but may recover if rates remain unchanged, with forecasts suggesting it could trade around $0.68 by early 2025.

Treasurer Jim Chalmers highlighted the stability of interest rates over the past year, underscoring the government's efforts to manage inflation while supporting economic growth.