Australian dwelling approvals surge 11.9% in June

Australian dwelling approvals posted their largest rise in more than 2 years in June, increasing by almost 12% in the month on the back of a surge in higher-density approvals. Detached or house approvals declined in June (-1.5%), their third fall in the past 4 months. Approvals have lifted substantially over the past year (27.4%) but remain at levels well contained relative to peaks in earlier cycles. Higher interest rates - even with the RBA now winding back policy restriction - is one factor that is still likely weighing on the home building sector. 

Headline dwelling approvals accelerated to their fastest rise since May 2023 with an 11.9% lift in June - well above the 1.8% rise expected. This saw approvals cross 17k for the first time since August 2022, reversing the decline seen over February-April. Driving the surge was higher-density or unit approvals, the volatile segment seeing approvals jump 33.9% to a 30-month high in June (7.8k). By contrast, house approvals were down 1.5% to 9.3k - the level little more than flat on 12 months ago (0.8%). 

Despite June's strong rise, approvals declined by 3.4% across the quarter (47.3k). As with the headline result, higher-density approvals - although surging in June - lost ground in the quarter falling by 11.1% (18.9k). This weakness was partially offset by a 2.5% lift in house approvals (28.4k). This gain for house approvals was driven entirely by a strong result in April (6.4%), with declines later coming through in May (-1.1%) and as reported today in June (-1.5%).  

Remarkably, alteration approvals continue to remain in an uptrend - despite already being well above the levels that were seen through the pandemic when a range of stimulus measures were supporting home renovations. Alongside rising housing prices, tight housing supply and longer construction timeframes due to labour shortages could be relevant factors driving renovations.   

Australian retail sales sign off in style

Australian retail sales surged to their strongest rise since March 2022 after posting a 1.2% lift in June, well above the 0.5% increase expected. Mid-year sales discounting and the release of the Nintendo Switch 2 were key factors that prompted cautious households to loosen the purse strings on discretionary purchases. This was a stellar result for the retail sales series to sign off its 75-year history on, with the ABS now shifting to a broader measure of monthly household spending. 

Retail sales accelerated by 1.2% to $37.9bn in June, up 4.5% on 12 months ago. This was the fastest month-on-month rise for retail sales since March 2022, driven by discretionary sales that rose at a 19-month high (1.4%). In addition, sales growth for May was revised up from 0.2% to 0.5%. Retail sales were up 1% overall across the quarter, with monthly gains averaging 0.6% in the period - its strongest momentum by that measure since September 2022. 

The media release from the ABS reported that mid-year sales boosted spending on big ticket items including furniture (3%) and electronic goods (3.9%), the latter also supported by the launch of the Nintendo Switch 2. Clothing sales also lifted sharply (2%) due to discounting on winter lines.

As noted, retail sales rose by 1% overall for the June quarter. Growth in underlying volumes - sales adjusted for inflation - was 0.3%, a modest rise but above expectations for a 0.1% lift. Retail price growth eased to 0.6% in the June quarter and 2.4% over the year, down from 2.7% previously. This compares to headline inflation that was reported yesterday to be at 2.1% (see here). 

The key driver of volume growth in the quarter was household goods, driven by discounting. Volumes overall rose by 1.5% over the year - a vast improvement on their -0.3% pace 12 months ago. Historically, the volume data has flowed through to household consumption in the National Accounts; however, the ABS ceased this process at the end of 2024.

At the peak of the inflation surge, retail prices were rising by more than 7% year-on-year. A weaker demand backdrop and improved supply chains have been key factors in easing price pressures in the sector.    

At the state level, households in New South Wales came out to play - nominal sales there rising by 1.6% in June, their sharpest rise going all the way back to February 2022. Sales in Victoria and Queensland lifted by 1.2%. Western Australia has shown the most consistent profile for sales growth in 2025, though interestingly sales there slowed to 0.3% in the latest month.  

Australian Q2 CPI 0.7%, 2.1%Y/Y

Quarterly inflation in Australia was softer than expected in the June quarter at 0.7% on a headline basis and 0.6% in trimmed mean or core terms. The RBA defied expectations to cut rates earlier this month to await today's report. A rate cut in August now shapes as a straightforward decision with headline (2.1%Y/Y) and core inflation (2.7%Y/Y) comfortably inside the 2-3% target band and largely on track with the RBA's forecasts. Market reaction on the report was sharp as pricing for an August cut firmed to a lock, with 2 additional cuts to a year-end cash rate of 3.1% close to fully discounted as well.  

Headline CPI came in at 0.7% in the June quarter, a bit below the 0.8% figure expected and down from 0.9% in the March quarter. In annual terms, headline inflation slowed from 2.4% to 2.1% to be pressing the bottom of the target band. The figure was also in line with the RBA's May forecasts and below the 2.2% figure expected by markets. Softer headline inflation was backed up by encouraging signs in core CPI. 

The trimmed mean measure was 0.6% in the June quarter, below expectations for 0.7%. This saw the annual pace decline from 2.9% to 2.7% (vs 2.7% expected), its slowest since the December quarter of 2021 - but a tick above the RBA's 2.6% forecast.  

Inflation momentum, measured in 6-month annualised terms, has picked up on a headline basis to 3.3%, up sharply from 0.9% at the end of last year. However, that rise has been expected because household rebates on electricity bills have been winding down over the first half of the year. More importantly, core inflation is tracking at 2.6% in 6-month annualised terms, essentially in line with the midpoint of the RBA's target band.  

Moving to the specific dynamics in the June quarter, utilities remained a major driver of inflation adding 0.21ppt to quarterly CPI on the electricity rebate unwind. Durable goods (0.25ppt) and new dwelling costs (0.04ppt) - areas of concern highlighted by the RBA - both pushed up on inflation but fairly modestly. Groceries (0.17ppt) also added to inflation, driven largely by a strong rise in fruit and vegetable prices. At the other end of the scale, declines in fuel prices (-0.17ppt) weighed heavily on inflation in the quarter, as did domestic holiday travel (-0.17ppt) during the off-peak season.     

Another key aspect of today's report is that services inflation has cooled further. In the June quarter, services inflation slowed from 3.7% to 3.3% year-on-year, its slowest pace in 3 years. This has come on the back of an easing in some of the areas of persistent price pressures, including insurance - now at 3.9%Y/Y from a peak above 16%Y/Y a little over 12 months ago - and rents at 4.5%Y/Y, slowing from highs that pressed 8%Y/Y in early 2024. Goods inflation remained low easing from 1.3% to 1.1%Y/Y.   

Preview: Australian Q2 CPI

Australia's quarterly inflation report for the June quarter is due to be published by the ABS this morning (1130 AEST). This is the most comprehensive read on prices in the Australian economy, and for an RBA that is suspicious of the pace of disinflation implied in the monthly CPI gauge, the report is key to the near-term rates outlook. The RBA defied expectations to cut rates earlier this month, awaiting confirmation via the quarterly data that inflation is tracking in line with its forecasts. An August rate cut is essentially fully priced in already, so a hawkish repricing (higher AUD and bond yields) on upside surprises for the key inflation outcomes is where the volatility risk for markets sits going into the report.  

June quarter preview: Inflation trajectory key to further RBA rate cuts 

In today's report, headline CPI is expected to print at 0.8% in the quarter (forecast range: 0.7-0.9%), with the annual pace easing from 2.4% to 2.1% - in line with the RBA's May forecasts. Consensus for core or trimmed mean inflation is 0.7% (range: 0.5-0.8%) and 2.7% year-on-year, slowing from 2.9% currently but a little above the RBA's forecast for 2.6%. As a guide, annual headline CPI in the monthly indicator came in at 2.4% in April and 2.1% in May, while the trimmed mean measure was 2.8% in April and 2.4% in May. 

The June quarter inflation outcomes will be a key input for the RBA as they revise their inflation forecasts going into the August meeting. The outlook for headline inflation is fairly volatile, with the RBA currently projecting it to rise again over the back half of the year to 3% as cost-of-living subsidies unwind. By contrast, core inflation is currently seen maintaining an easing pace to end the year at 2.6%, nearly on the midpoint of the target band. The RBA is looking for today's report to confirm core inflation specifically remains on this sort of trajectory. 

Key items to watch out for in today's report are housing and durable goods prices. At the July meeting, RBA Governor Bullock highlighted upside risks to inflation from these sources based on the monthly data for April and May. Most focus will fall on the housing group (21% weighting in the CPI basket), which is seeing upward pressure from electricity rebates coming to an end and from home building costs that may be on the rise again.  

March quarter recap: Core inflation returns to RBA target band 

Quarterly headline inflation picked up to 0.9% in the March quarter, rising from 0.2% in the prior quarter alongside the fading impact of household electricity rebates. Nonetheless, the annual pace held at an unchanged 2.4%. Trimmed mean inflation firmed from 0.5% to 0.7% in the March quarter; however, the annual pace declined from 3.3% to 2.9%, its slowest pace since late 2021. With both headline and core inflation sitting within the RBA's 2-3% target band, the Monetary Policy Board cut the cash rate by 25bps to 3.85% at its May meeting. 

Slowing services inflation was a key factor behind the easing in core inflation. Services inflation softened from 4.3% to 3.7% year-on-year in the March quarter, its slowest pace since the middle of 2022 and well down from its peak of 6.3% reached a year later. These are the signs the RBA has been looking for as it starts to lower rates, with easing services inflation suggesting that some of the more persistent price pressures in the economy have cooled. Meanwhile, goods inflation ticked up from 0.8% to 1.3% year-on-year, though it remains low even compared to 12 months earlier (3.1%) and is just a fraction of its pandemic highs (9.6%).  

Macro (Re)view (25/7) | Uncertainty eases, but for how long?

Uncertainty for markets was, at the margin, lessened by the trade deal struck between the US and Japan this week. The deal has secured a 15% tariff on Japanese imports, down from an initial rate of 25%, while the sectoral tariff on auto imports was lowered from 27.5% to 15%. Japanese equities were the top performer this week adding more than 4% on the back of the deal. The optimism also spilled over to US and Asian equities, reflected also in the cyclical EUR and AUD advancing against the USD. The reprieve may not last long though, with markets waiting on other trade deals ahead of the August 1 deadline. There is also a Fed meeting for markets to navigate as President Trump has continued his criticism of the central bank.    

It was a quiet week in the US with limited data and the Fed in its blackout period ahead of next week's meeting. Trump has maintained his pressure on the Fed to lower rates, but there is next to no chance of that happening next week going by market pricing. A September or December cut is, however, being weighed up. In addition to the Fed meeting, next week sees the August 1 deadline imposed by Washington for trade deals fall and the July nonfarm payrolls report comes through on Friday.  

After delivering 8 rate cuts since June last year - the last 7 coming at consecutive meetings - the ECB left its key rates unchanged this week, with the depo rate - the main rate for monetary policy - held at 2%. With inflation sitting on the 2% target, ECB President Lagarde said in the post-meeting press conference that it was now a 'wait-and-watch situation' for the central bank amid the trade negotiations taking place between the EU and Washington. 

The level of tariffs the US ultimately imposes on European goods and whether or not the EU retaliates bear significant uncertainty over the inflation outlook in the euro area. A strong euro - also a factor for the inflation outlook - is something Lagarde said the ECB was 'monitoring'. But trade is the main game and in the absence of greater clarity here the ECB seems to be at the point where it has taken rates down as far as it is prepared to go. According to a Reuters article quoting ECB sources 'a significant deterioration in growth and inflation' would be needed to unlock further monetary policy easing. Markets price one further 25bps cut by year-end.     

Further insights on the RBA's decision to hold rates steady - against widespread expectations for a 25bps cut - earlier this month came to hand via the meeting minutes and in a speech from Governor Bullock. In the end analysis the Board held the cash rate at 3.85% on the basis that cutting rates for a third time in its past 4 meetings wouldn't have been consistent with either the data or its 'cautious and gradual' to removing policy restriction. Back on decision day, Bullock said the direction was more about timing than direction - and the minutes back that up. 

Key judgements were that rates at their current level were 'modestly restrictive' and that 'all members' agreed that further easing was warranted, based on the inflation outlook. Governor Bullock's speech focused on the dual mandate - 2-3% inflation and full employment - of the RBA, giving fresh insights on the latter. The uptick to 4.3% on the unemployment rate in June does not appear to have perturbed Bullock. While there were signs of easing in the labour market identified from reduced hours, lower job vacancies and less churn from people switching jobs, the RBA's view is that conditions remain on the tight side.

Macro (Re)view (18/7) | USD finds momentum

The US dollar climbed this week, overcoming an earlier fall on reports President Trump was on the verge of removing Fed Chair Jay Powell. The incoming data drove the dollar higher as Fed rate-cut pricing was reduced, markets now struggling to see the Fed delivering more than one further cut by year-end. Amid a stronger dollar, the local Australian dollar underperformed on the back of weak labour market data, amplifying pressure on the RBA following its surprise decision last week to hold rates unchanged. Equities mostly advanced but were patchy in Europe. Concerns around increased supply from fiscal deficits were again in the news - this time in Japan - but bond markets were not a source of cross-market volatility this week. 

Signs of tariff-driven inflation were limited in this week's US CPI data. Headline CPI printed 0.3%m/m and 2.7%yr, a touch more than expected (2.6%) and up from 2.4% prior. But that was offset by core CPI (ex-food and fuel) that came in at 0.2%m/m, the 5th consecutive below consensus outcome. The annual pace firmed from 2.8% to 2.9%, in line with forecasts. Tariff-relevant effects were seen in areas such as fresh fruit and vegetables (1%) and household appliances (1.9%), but their overall contribution to monthly inflation was modest. In addition to the CPI report, both producer (2.3%yr) and import prices (-0.2%Y/Y) indicated that tariffs have yet to meaningfully affect pricing decisions.

Meanwhile, some positive data around the US consumer came from retail sales that surprised to the upside in June. Headline sales advanced 0.6%m/m (vs 0.1%), rebounding from May's 0.9% decline. That was backed up by the control group - widely touted as a better guide of the momentum in spending - lifting by a stronger-than-expected 0.5%m/m (vs 0.3%).               

UK inflation and labour market data reaffirmed the Bank of England will likely retain its 'gradual and careful' approach to its easing cycle. Upside prints revealed some of the inflation risk the BoE has been wary of as headline CPI in June lifted from 3.4% to 3.6%yr (vs 3.4%), while the core rate nudged up from 3.5% to 3.7%yr (vs 3.5%). Inflation well above the BoE's 2% target is to a large extent due to elevated inflation in services prices. On the latest read, services inflation was 4.7%yr, an unchanged pace from May but defying expectations to ease to 4.5%. Services inflation is proving sticky and is unlikely to slow materially near term, with many prices in this part of the basket government-regulated and only resetting annually or infrequently. The BoE has therefore been looking closely at the labour market as a gauge on the underlying pulse of services inflation. 

The labour market is clearly cooling, but with well documented quality-related issues continuing to plague the data the BoE is going by feel. The figures that were reported showed the unemployment rate rising from 4.6% to 4.7% in May, coming on the back of a 41k fall in payrolled employment. But the drop in employment is likely to be subject to a significant revision; this week's data revised the 109k fall in employment initially reported in April to a much smaller decline of 25k. Perhaps the cleanest read on conditions is coming from earnings growth, which (excluding bonuses) slowed to an annualised pace of 5% from 5.3% previously, consistent with a softening labour market. 

Next week's ECB meeting shapes as a case of steady as it goes. Downside risks to the economic outlook in the euro area are building but the expectation is the ECB will leave policy on hold. The threat of a 30% tariff hangs over European goods entering the US, unless the Trump administration and the EU can come to terms by August 1. The ECB can only set policy to what is announced, so it is waiting to see how the situation evolves, and the extent of any countermeasures that may follow. Expect the strength of the euro to be a key focus at the meeting. Typically, the ECB avoids commenting on the level of the exchange rate, but this has increasingly been a source of focus for officials from the central bank, posing downside risks to growth and inflation.   

In Australia, the unemployment rate was reported to have lifted to 4.3% in June, its highest level since late 2021 after 5 consecutive months at 4.1% (reviewed here). Higher unemployment reflects the impact of employment growth slowing - not falling - with labour force participation (67.1%) around record highs. Employment put in its second consecutive flat outcome lifting by just 2k in June (vs 20k expected) after a 1.1k decline in May. Signs of softening in the labour market - if sustained - would present a strong challenge to the RBA's patient stance on rate cuts. An August RBA rate cut that the Board had seemingly tied to the June quarter inflation data looks even more likely now.

Australian employment 2k in June; unemployment rate 4.3%

Australia's unemployment rate has lifted to its highest level since November 2021, rising to 4.3% in June from the 4.1% level it had held since the start of the year. Today's poor report is untimely for an RBA that resisted widespread calls to cut rates earlier this month. Market reaction on the figure was strong ($AUDUSD -0.5%, 3-year yield -9bps) as the swaps market locked in a rate cut for the next meeting in August. While this RBA has shown it will move independently of market pricing, signs of softening in the labour market puts a different complexion on its disposition to wait for the quarterly inflation data due later this month. 

By the numbers | June

• Employment increased by a modest 2k in June (full time -38.2k/part time 40.2k), well short of the 20k rise anticipated. The decline in employment in May was revised to a smaller fall of -1.1k from -2.5k previously. 
• The unemployment rate rose to 4.3% against expectations for it to hold at 4.1%. With underemployment also ticking up from 5.9% to 6%, total labour force underutilisation increased from 10% to 10.3%. 
• Labour force participation returned to 67.1% from 67%, reversing its decline from last month. The employment to population ratio was steady at 64.2%. 
• Hours worked fell sharply by 0.9% on the month, slowing annual growth from 3.1% to 1.8%.  

The details | June 

There are signs that employment is cooling, with a net 2k rise in June (FT -38.2k/PT 40.2k) coming on the back of a 1.1k fall in May. Employment figures have been hugely volatile this year, but today's report makes it soft outcomes in back-to-back months.

The overall picture on employment is still solid: employment increased by 86.4k for the June quarter - its strongest quarterly rise since Q3 last year - and gains in the period averaged out at a decent run rate of 28.8k per month. But with all the heavy lifting on employment having been done in April (85.5k), the slowdown in May-June is worth exploring. 

Developments such as the announcement of the Trump Administration's tariff regime and the federal election domestically may have led to more caution around hiring than earlier thought. An alternative viewpoint is that hiring in the non-market (government) sector may be slowing, the segment that has kept employment well supported amid the slower growth backdrop in Australia - but the federal election may have also played a role here.  

Although there is a lot of uncertainty around the dynamics, slower employment means the unemployment rate has started to move up. A fall in participation prevented the unemployment rate from creeping higher last month, but with participation going on to rebound to 67.1% in June the unemployment rate shot up to 4.3%, a 43-month high. Unemployment averaged 4.2% across the June quarter - still a low level - and the averages of the broader measures of underemployment (6%) and underutilisation (10.1%) were also low. Slower employment, if sustained, will see these measures loosen, so this will need to be monitored. 

Hours worked have swung around with the volatility in employment. In June hours worked were down 0.9% on the month; however, hours worked lifted by 0.4% in the quarter - a little below the increase in employment (0.6%). 

In summary | June  

Robust labour market conditions played a key role in the RBA's decision to hold rates steady at last week's meeting, with the Board signalling its preference to wait for the quarterly inflation data. But given today's report where question marks have emerged around the labour market, that narrative seems much less likely to survive the RBA's next meeting in August - even if inflation shows a little less progress than desired. 

Preview: Labour Force Survey — June

Australia's labour force survey for June is due from the ABS this morning (1130 AEDT). Robust labour market conditions were a key factor in the RBA's decision to hold rates unchanged earlier this month against widespread expectations for a cut. Although recent monthly employment outcomes have been volatile, the unemployment rate has held at the historically low level of 4.1% for the past 5 months alongside labour force participation around record highs. Governor Bullock said following the decision that the RBA was taking a cautious and gradual approach to the easing cycle and that it would be closely watching the data, including today's labour market report. 

June preview: Anything goes 

Expectations are set modestly for today's report that shapes as another wildcard. Employment is forecast to rise by 20k, rebounding a 2.5k fall last time out in May. This would see the unemployment rate holding at 4.1%, based on an unchanged participation rate of 67%. As the chart below shows, employment (green line) has been highly volatile in recent months, so markets will be giving little weight to the expected figure of 20k. 

The unemployment rate will be of much greater importance. Any uptick from 4.1% could drive a reaction (weaker AUD and lower yields) on the basis that signs of labour market softning could be enough to nudge a reluctant RBA into cutting rates. Conversely, a steady or lower unemployment rate could see the odds for an August RBA rate cut (90%) pared back.   

May recap: Employment falters with surprise fall 

Employment faltered in May declining by 2.5k on net (full time 38.7k/part time -41.1k), disappointing expectations for a 21.5k rise that looked to be well in hand after April's strong increase (87.6k). The decline in May is more likely symptomatic of the recent volatility in employment outcomes rather than a deterioration in the underlying labour market conditions.

Speaking to that point, the unemployment rate has remained low and steady in 2025, printing at 4.1% for 5 months in succession. If anything, declines in the underemployment rate from 6% to 5.9% and in total underutilisation from 10.1% to 9.9% suggested the labour market tightened a little in May. While an easing in the participation rate from 67.1% to 67% assisted in holding unemployment steady - even with employment falling - the participation rate is still elevated and stands near record highs. 

Hours worked also defied the fall in employment to rise strongly by 1.3% on the month, with base effects accelerating annual growth from 1.1% to 3.1%. Hours rising in May appeared to be a catch up from the month prior following the surge in employment. 

Macro (Re)view (11/7) | The tariffs are in the mail

The conclusion of the initial 90-day extension to the Trump administration's tariff regime has seen a further delay, pushed back to August 1. According to AP News, Trump sent letters to 23 countries outlining the tariff rates that will be imposed unless a trade deal can be negotiated by that date. While uncertainty continues to linger this gave markets a little more breathing room. US equities came off slightly for the week but remain around record highs, while indices in Europe and most of Asia advanced. Tariffs have been a US dollar negative but not on this occasion as the US dollar ended the week higher on the major crosses. Global bond yields lifted, the move a bit higher in Australia after the RBA's surprise decision to leave rates on hold.   

Federal Reserve policymakers were prepared to bide their time leaving rates on hold last month (4.25-4.5%) with tariff-related uncertainty clouding the economic outlook, the June meeting minutes showed. Judging that the economy and the labour market were still in solid shape - with interest rates 'moderately or modestly restrictive' - the FOMC concluded that it was 'well positioned' to respond to the uncertainties that lay ahead. That was the collective view; however, individual interpretations within the FOMC vary significantly. 

A couple of members (Waller and Bowman) have said they are prepared to back a cut at the next meeting (July 29-30); other members lean towards cutting but not next time; and some see no more cuts this year. The various views on policy reflect differing outlooks for the economy, but ultimately the data will steer policy for an FOMC taking more of a reactive stance. The key concerns for the FOMC is that the prevailing uncertainty will weigh on investment and hiring decisions of firms, and for households - depending on how tariffs pass through to prices - spending could be affected disproportionately across the income distribution.

The EU, currently in negotiations with the Trump administration, is reportedly not expecting to a receive a tariff letter, but the situation is very fluid. Markets continue to lean to a September rate cut from the ECB to support the economy amid the uncertainty. Data this week showed that weak sentiment may be weighing on households. Retail sales for May posted a 0.7% decline, with annual growth sliding from 2.7% to 1.8%.    

A cautious RBA surprised with its decision to hold the cash rate at 3.85%, going against market pricing that had nearly fully discounted a 25bps cut (reviewed here). A preference to wait for more comprehensive quarterly CPI data as opposed to the higher frequency (but less detailed) monthly CPI indicator was behind the decision. The RBA wants more assurance that inflation is on track to fall closer the midpoint of the 2-3% target band and stay there before it cuts again. 

Cuts again is the key point because RBA Governor Bullock said in the post-meeting press conference that this week's decision was about 'timing rather than direction'. The 9-member policy Board voted 6-3 to hold, so only a modest shift in the vote pattern will be needed to swing the majority to a cut at the next meeting on August 11-12. By then the RBA should have sufficient information to justify a cut, including the quarterly CPI report for Q2, a new set of economic forecasts and additional information on the labour market. 

RBA defies cut expectations with July hold

The RBA held the cash rate unchanged at 3.85% at today's meeting, as a 6-3 majority on the Monetary Policy Board defied widespread expectations for a 25bps rate cut. The surprise decision forced markets to backpedal, the Australian dollar traded nearly as high as US$0.6550 from $0.6510 pre meeting and a sell-off in the bond market drove the 3-year yield 11bps higher to 3.4% by the close. Having already eased by 50bps with cuts in February and May, Governor Bullock said the Board was maintaining a 'cautious, gradual approach' and today's hold was about 'timing rather than direction'. The Board will await more information - including the June quarter CPI report (due July 30) and new RBA staff forecasts - to confirm that inflation is on track to hold at the midpoint of the 2-3% target band before moving again. The next cut looks likely to come in August - but as today showed, nothing can be assured.  

Markets were expecting a cut today only to be surprised as the RBA took a different view on the data and its policy guidance. The misalignment in views only increased as today's meeting drew nearer, largely because a void of policy-relevant speeches or appearances from RBA officials had left expectations for a cut to climb unchecked. At the post-meeting press conference, Governor Bullock pushed back on that version of events, saying that it would not have been appropriate for the RBA to guide markets prior to a meeting. But today's situation is clearly unhelpful to a newly formed Board and to an RBA that has worked to revamp its communications following the review into the central bank.  

Today's decision statement effectively revealed that little had changed for the Board since the May meeting. The labour market remains in robust shape, with the Board continuing to judge that conditions are tight. Although economic growth was subdued in the March quarter (0.2%q/q, 1.4%Y/Y), the Board did not see that as posing an increased risk to the expected pick-up in household consumption. Neither was it convinced by the slowing in inflation (2.1%yr headline, 2.4% core) in the monthly CPI gauge for May. In fact, Bullock pointed to upside risks to inflation from the monthly indicator, citing home building and durable goods prices. When it comes to inflation, the line has basically been drawn in the sand that it is only the quarterly CPI reports that the Board is prepared to move on. Further to that, Bullock said the Board will look to the Q2 CPI report to confirm that inflation is falling in line with its forecasts. Should that be the case, a cut is likely on the cards for August. 

Events offshore around global trade were still considered highly uncertain, a key factor giving the Board reason to pause. The RBA expects global growth will be weaker due to the US administration's tariff agenda. In an Australian context, the spillover effects on household spending and business investment are what the RBA is waiting to gain greater clarity on. The next RBA monetary policy meeting is on 11-12 August.