The RBA Wants Australians to Stop Spending: Here’s What That Means

If there’s one thing the Reserve Bank of Australia (RBA) wants, it’s for Australians to stop spending. The RBA recently released the minutes of its February meeting, where it raised the official cash rate up 25 basis points to 3.35%. The RBA was close to going with a mega 50 bps, but opted for calm in the end. Despite this, consumer sentiment has been at or below GFC levels for several months, and the value of retail sales surged in the pandemic lockdown.

Related Facts

• The RBA raised the official cash rate up 25 basis points to 3.35%
• Consumer sentiment has been at or below GFC levels for several months
• The value of retail sales surged in the pandemic lockdown
• Retail sales showed a 0.9% increase for the fourth quarter, down from 2.5% in the prior quarter
• Core inflation was 1.7% over this period

Argument

The RBA is trying to cool domestic demand and reduce inflationary pressures. The RBA is hoping that Australians will take the hint and stop spending. This is evidenced by the fact that consumer sentiment is at or below GFC levels, and retail sales have been declining. Core inflation was 1.7% over this period, suggesting that retail spending fell in inflation adjusted or volume terms. This is a sign that the RBA’s efforts to cool domestic demand are working.

Key Takeaways

• The RBA is trying to cool domestic demand and reduce inflationary pressures.
• Consumer sentiment is at or below GFC levels, and retail sales have been declining.
• Core inflation was 1.7% over this period, suggesting that retail spending fell in inflation adjusted or volume terms.

Conclusion

The RBA is making progress in cooling domestic demand and reducing inflationary pressures. Consumer sentiment is at or below GFC levels, and retail sales have been declining. Core inflation was 1.7% over this period, suggesting that retail spending fell in inflation adjusted or volume terms. These are all signs that the RBA’s efforts to cool domestic demand are working.