Reserve Bank of Australia Governor Michele Bullock has reinforced the bank’s cautious stance on interest rate cuts, stating that further evidence of a weakening labour market is needed before any monetary easing.
Speaking at the annual Anika Foundation dinner, Bullock said that while the unemployment rate has edged up to 4.3%, the RBA is not aiming for job losses to combat inflation. Instead, the central bank is looking for subtler signs of a cooling economy—such as fewer job vacancies, shorter working hours, and less labour mobility.
“We are not trying to engineer mass unemployment,” Bullock said. “The kind of slowing we’re looking for is difficult to see in the aggregate data. But these kinds of adjustments are much less painful than widespread job losses.”
The RBA’s July board meeting ended with a 6–3 vote in favour of keeping the cash rate at 3.85%, as concerns persist over strong employment growth potentially reigniting inflationary pressures.
While markets had expected a rate cut, Bullock’s remarks suggest that the board needs more convincing evidence that the economy is slowing without tipping into recession. “There’s no magic wand,” she warned. “We need to be patient and look at the bigger picture.”
The rise in the jobless rate to a three-year high was anticipated by the RBA and falls within its economic forecasts. However, Bullock stressed that the board is alert to the risks of easing too soon. “There’s still considerable momentum in the labour market, and that’s something we need to watch very carefully,” she added.
The next board meeting is scheduled for August 12, and analysts say the probability of a cut remains 50-50, contingent on labour data and inflation figures due in early August.
