RBA Recap & The Australian Economy

• The RBA took the markets by surprise with a 25 basis point hike at its May Meeting, taking the cash rate to 3.85%.
• The goal to return inflation to target within a “reasonable timeframe” seems like it will be a prominent theme for the RBA over the months ahead.
• What constitutes a reasonable timeframe and how is Australia currently tracking?
• Unemployment remains at historical lows with a trend in the dominance of full-time roles vs part time roles.
• With services inflation proving sticky, the consumption behaviour of consumers will be a key influence on future monetary policy.

Market Dynamics

• Uncertainty has reduced since the collapse of SVB and overseas liquidity concerns.
• A rise in outright term deposit and NCD rates has been driven by markets repricing after the RBA hike and a recent pick up in the demand for funds.
• It will be interesting to see if the repayment of TFF will increase ADI’s appetite for longer term.

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