RBA Recap

• The RBA held the cash rate at 4.35% for a second consecutive meeting in August, a deliberate continuation of the pause rather than a shift towards comfort, as the Board opts to wait for greater clarity on how the three earlier increases are working through the economy before deciding whether more is needed.
• Inflation remains the Board’s central concern, with trimmed mean little changed since March and risks to the outlook still skewed to the upside, even as the disruption from the Middle East conflict has so far proven less severe than initially feared.
• Markets read the accompanying statement as more dovish, but Governor Bullock’s press conference made clear the Board has not ruled out further tightening, framing the August decision as pause, but not pivot.

The Australian Economy

• Inflation told a two-sided story over the period, with headline CPI easing to 3.9% in the June quarter and its softest annual pace since February, though the trimmed mean measure barely moved, leaving underlying price pressure firmly intact.
• The labour market delivered the standout surprise of the period, with employment surging by a record 76,300 in June against expectations for a modest gain, a result that undercuts the case for the gradual softening the Board has been forecasting.
• The broader economy showed signs of resilience rather than retreat, with business activity and sentiment firming through July even as housing values recorded their sharpest monthly fall since 2022, a genuinely mixed picture that gave the Board reason for patience rather than urgency.

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