The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
Borrowers expecting a reduction in interest rates due to sluggish economic growth might have to wait longer, as the Reserve Bank of Australia (RBA) prioritizes inflation management.
Though the economy is experiencing a downturn, RBA Governor Michele Bullock emphasizes that the demand for goods and services still outstrips supply capabilities.
"It's understandable that people think a slower economy should lead to rate cuts, but we need tangible inflation improvement before making such a move," Bullock stated during her speech on Thursday.
This comes in the wake of a modest 0.2% economic growth in the June quarter, with an annual increase holding at 1%, marking the lowest since the 1991 recession outside the pandemic period.
The slowdown was anticipated as a consequence of maintained high-interest rates aimed at dampening demand to curb inflation.
Despite slowing growth, Bullock pointed out that demand remains high partly because post-pandemic resurgence has sustained some strength in the economy.
She also mentioned the ongoing underperformance on the supply side, particularly in productivity growth.
"It's a matter of growth rates versus levels," she explained at the Anika Foundation Fundraising Lunch, indicating that inflation persists due to demand remaining higher than supply capabilities.
This protracted wait for interest rate cuts is challenging for the federal government, which faces scrutiny over its budgetary decisions and their impact on inflation.
Bullock acknowledged that both federal and state governments are wrestling with inflation as it directly affects their regions' residents.
When asked if Treasurer Jim Chalmers was shifting blame to the RBA, Bullock refrained from commenting directly but clarified both were committed to their roles.
The opposition has leveraged the national accounts to criticize the government, with Shadow Treasurer Angus Taylor suggesting a conflict between government spending and RBA's inflation control measures.
In defense, Finance Minister Katy Gallagher highlighted that the government's expenditure was strategically targeted to support the economy without exacerbating inflation;
"Had the government not provided necessary aid during this period, the economic figures would have been worse," Gallagher told ABC TV on Thursday.
Bullock further dedicated significant portions of her speech to the hazards posed by stubborn high inflation.
She cautioned that although inflation expectations are stable, this stability is not guaranteed. A scenario of expected consistent price rises could necessitate further interest rate hikes.
"In that case, we would need to throttle the economy more, leading to higher unemployment and potential recession," she warned.
Prolonged inflation risks pushing more borrowers, particularly those with lower incomes, into mortgage stress and potentially forcing home sales.
"High inflation is why there is so much cost of living discussion - it adversely affects everyone, especially the most vulnerable,” Bullock concluded.
In June 2025, Australian business lending experienced a notable increase, with loans to non-financial businesses reaching $1.14 trillion, marking a 9.2% year-on-year growth. This expansion significantly outpaced the 5.6% growth observed in housing loans, which totaled $2.34 trillion during the same period. The data, released by the Australian Prudential Regulation Authority (APRA), highlights a renewed appetite for corporate borrowing and investment. - read more
In July 2025, Australia's top 10 authorised deposit-taking institutions (ADIs) reported a combined business loan book of $925 billion. Notably, Japanese banking giants Sumitomo Mitsui Banking Corporation (SMBC) and Mitsubishi UFJ Financial Group (MUFG) emerged as significant contributors to this growth, outpacing traditional Australian lenders in percentage growth rates. - read more
In November 2025, the Australian Financial Complaints Authority (AFCA) issued a cautionary statement to small businesses regarding the risks associated with engaging unregulated lenders. This warning comes in response to a notable increase in complaints that AFCA cannot address due to the lenders' non-membership status. - read more
Creating a sturdy financial foundation is essential for Australians navigating the often turbulent waters of debt. A bulletproof budget does more than just track expenses; it acts as a buffer against unexpected financial downturns and provides a clear path toward financial freedom. Comprehending the full weight of this importance is the first step to turning one's financial destiny around. - read more
Welcome to the world of savvy home financing! Whether you’re a first-time homebuyer or seasoned investor, navigating the ocean of home loan options can be daunting. In this digital era, one tool stands out for its effectiveness in simplifying this journey: the online home loan calculator. - read more
Personal loans are a type of financing option that individuals can use to fund various personal expenses. Unlike mortgages or car loans, they aren't earmarked for a specific purpose, giving borrowers more flexibility in how they use the funds. These loans are usually unsecured, which means you don’t have to provide collateral to borrow money. - read more
Knowledgebase
Collateral: An asset that a borrower offers as a way for a lender to secure the loan.
