Reserve Bank decision to hold interest rate at 3.6% labelled “very cruel”

The Reserve Bank of Australia has today decided to leave the interest rate unchanged at 3.6%.

In its reasoning, the RBA argued that the situation is uncertain, but all the uncertainty points to slower growth.

“Uncertainty in the global economy remains elevated,” it said.

“There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided. Trade policy developments are nevertheless still expected to have an adverse effect on global economic growth over time.

“Beyond tariffs, a broader range of geopolitical risks remain a threat to the global economy. This could all weigh on growth in aggregate demand and lead to weaker labour market conditions in the domestic economy.”

However, some economists have pointed out that slower growth strengthens the case for a rate cut, as lower interest rates will increase consumer spending and help grow the economy.

The RBA’s decision has been labelled “very cruel” by Chief Economist at the Australia Institute, Greg Jericho.

Mr Jericho said the decision means more pain for those struggling with high mortgage repayments.

He also said more people who lose their jobs.

“The Reserve Bank has once again chosen to be content with rising unemployment,” he said.

“While there have been some signs of improved household spending, the major reason for the increase has been the recent interest rate cuts, rather than an underlying strength in the economy.”

Mr Jericho highlighted the last recent GDP figures, which showed the economy still growing at barely half the long-term average, while unemployment has been rising steadily for all of this year.

“The opportunity to lock in unemployment at 4% is fast disappearing due to the Reserve Bank believing there needs to be more people unemployed in order to keep inflation below 3%,” he said.

“For those Australians forced to live in poverty on Jobseeker, this is a very cruel decision.”