RBA rate cut live updates: Reserve Bank of Australia Governor Michele Bullock on why interest rates were held

In the latest episode of News Worthy, Ben O’Shea breaks down what happened today - and why.

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Ms Bullock has told reporters the RBA’s main focus was on the “domestic economy and where we think the domestic economy is headed.”

She said the situation was very different from the May meeting when the Board was contemplating a global trade war, including 145 per cent tit for tat tariffs between the US and China.

She said the global economy was still in a worse state than prior to Trump’s ‘Liberation Day’

“Everyone’s saying, ‘oh, things aren’t as bad anymore’. They’re still much, much worse than they were prior to April 2,” she said.

“Trade barriers, tariffs are going to be much, much higher. World Trade is going to be impacted. Our judgement, though, because we are not as directly impacted by the US itself, (is) we’re not going to be anywhere near as badly impacted as some countries, because we’re not as directly linked to the United States, and our fortunes are much more linked to China. And so that’s why a lot depends on what happens there,” she said.

Productivity in Australia has barely budged in years and Reserve Bank Governor Michele Bullock says it’s time to take a hard look at why.

“Yes, productivity has been slowing, and it was slowing even before the COVID pandemic,” she said.

Referring to the Government’s upcoming roundtable on the issue, Ms Bullock said the RBA is actively reviewing the drivers of productivity — and questioning whether the old assumptions still hold.

“We are thinking about whether or not the assumptions that we typically think about are still relevant, and that’s ongoing work for us,” she said.

The comments highlight how weak productivity is complicating the RBA’s job. If output per worker isn’t improving, it becomes harder to deliver real wage gains without fuelling inflation.

“I think it’s really good that government and the Treasurer have latched on to productivity as being a really important thing that we’ve got to get on top of,” she said.

Governor Michele Bullock said there was “really good, active debate in the boardroom about the pros and cons of holding and easing.”

The disagreement, which saw 6 Board members vote in favour of staying on hold, while 3 called for a cut, wasn’t over direction — but timing.

“I would characterise it as saying that the difference between the two camps really was down to a slightly softer reading of the data for those who wanted to cut,” Ms Bullock said, “and also a little bit more concern about the downside risks, particularly on the international side.”

Governor Bullock has addressed concerns that a new round of tariffs have been proposed by the US.

“Global developments took up a lot of time at the board meeting over the past couple of days,” Ms Bullock said.

“The likelihood of a severe downside scenario associated with a trade war has abated. But this is a very fluid situation, and we will continue to watch the data here and overseas very closely to see how things play out.

“We continue to analyse what developments overseas mean for conditions here in Australia, and particularly for inflation and the labour market. Based on what we know today, the board continues to judge that it’s appropriate to maintain a cautious, gradual approach to easing monetary policy. We remain alert to adverse outcomes that could cause a sharp deterioration in the outlook.”

Reserve Bank Governor Michele Bullock shocked the market at 2.30pm by keeping rates on hold while many were expecting cuts.

She cites inflation as a key factor and said while given there has been two quarters of inflation in the target band so far but the bank needs more information before going again,

“However, some components suggest underlying inflation in the June quarter could be a little higher than our forecast. Wages growth has eased over the past year, but growth in Unit labour costs remains elevated, alongside continued weak productivity growth.

“By our next meeting in five weeks, we will have the June quarter CPI, another labour market reading, further information about international developments and an updated set of forecasts. So the board decided to wait a few weeks to confirm that we’re still on track to meet our inflation and employment objectives,” Ms Bullock said.

We’ll bring you all the latest as it happens.

The Treasurer has been asked about the impact on Trump’s new tariffs on the RBA’s decision and said it will be the ‘defining influences on our economy’.

“You can see in the Reserve Bank statement that the global uncertainty is really one of the defining influences on our economy at the moment, and I think it will be the main thing that shapes our choices as a government in this second term.

“The international environment is very unpredictable, very volatile, and the Reserve Bank Board has put that view in the statement pretty clearly,” Dr Chalmers said.

“Our job is to make our economy more resilient in the face of that uncertainty, make our economy more productive, and also try and make our budget more sustainable.

“And these are really the three goals behind the reform process that we kicked off at the start of this second term, because that global environment is going to constrain us. It’s going to shape our choices. It’s going to be such an important influence, and it’s an important influence on monetary policy as well.”

Dr Chalmers has said the decision to keep rates on hold is a suprise to mortgage holders and the nation’s economists.

“I acknowledge that there will be millions of Australians around the country who were desperately hoping for more rate relief today, in addition to the two rate cuts that we’ve already seen over the last five months,” he said.

“I think I’ve been upfront in saying that this will come. This decision has come as a surprise to the market and to almost every economist who’s expressed a view in recent days and weeks.”

The RBA has published the votes of the Board for the first time and Dr Chalmers has “welcomed the transparency”. As part of the RBA review, greater transparency was called for. The Board voted 6 to 3 to keep rates on hold.

“I think that transparency is a welcome change, and I’m grateful to the Reserve Bank, and particularly to the Governor of the Reserve Bank, for the role that she has played in making sure that those decisions are more transparent.”

A reporter is asking whether the board members who voted for a hold or cuts should be published.

The Treasurer believes it is best the votes stay anonymous.

“I think this strikes the right balance. It’s a good thing to have people around the table that will tease out and contest the views. We want these to be decisions which are taken after a lot of deliberation and debate.

“And I think the fact that the Reserve Bank Board was split on this occasion that there wasn’t a unanimous view is a signal that these decisions are deliberated and debated on properly and that’s a good thing.”