(Australian Associated Press)
Reserve Bank of Australia board members agreed that they needed to speed up a jobs boost when they cut the cash rate to a record low 1.0 per cent this month.
Minutes from the RBA’s July 2 meeting show members agreed that a second 25 basis point cut in as many months was needed to further eat into the spare labour market capacity, with a lower exchange rate and reduced interest payments on borrowing freeing up cash for households and businesses.
Members judged that the back-to-back move would support the necessary growth in employment and income and, in turn, support a gradual increase in underlying inflation.
“Members also judged that the extent of spare capacity in the economy, and the likely pace at which it would be absorbed, meant that a decline in interest rates was unlikely to encourage an unwelcome material pick-up in borrowing by households that would add to medium-term risks in the economy,” the minutes said.
The first back-to-back rate reduction since 2012 followed another month of mixed economic data, most notably underwhelming retail figures, and a stubborn unemployment rate, which remained at 5.2 per cent for May.
The minutes released on Tuesday showed members observed that employment growth continued to outpace growth in the working-age population.
“However, most of the strength in labour demand over preceding months had been met by an increase in participation, which had risen to a record high level, rather than a decline in the unemployment rate,” the minutes read.
RBA members said they will continue to monitor the jobs market as it mulls the timing of any further cuts, having already flagged another move before Christmas.