6 Jun 2023
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The Reserve Bank of Australia (RBA) Board has increased the cash rate by 0.25% to 4.10% at its June meeting.
June 2023 - Article provided by PSK's Chief Investment Officer Chris Lioutas.
Leading into the meeting, there was an approximate 50/50 chance of a rate rise as assessed by market pricing, with the probability rising following the higher-than-expected April inflation print which showed the risks of inflation reaccelerating higher.
Leading into the meeting, we thought the RBA might have paused this month before raising again in July, but obviously the RBA wasn’t in any mood to wait.
There was hardly any change from their May statement. Interesting, in that it followed a period in which there were quite a few changes in the statements from meeting to meeting.
Given the largely unchanged statement, there was only one subtle key point of difference – they clearly noted that growth in public sector wages is expected to pick up further and that the annual increase in award wages was higher than it was last year. By implication, the key point of conjecture here is that productivity growth will need to lift significantly from current levels for those wage increases not to add further upward pressure on inflation. We saw this as a subtle dig at the government from the RBA.
We don’t expect any meaningful increases in productivity growth. That together with the upward pressure on public sector wages and award wages, and current inflationary housing market dynamics (housing under-supply and high costs to renovate / build), we expect the RBA to have to raise rates at least another two times over the next six meetings to round out this calendar year.
Following their announcement, Australian equities moved lower, the AUD/USD rose, and bond prices fell (ie. yields higher).
As always, if you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
