Minutes of April’s Monetary Policy meeting reveal the pause decision was finely balanced and another increase on 2 May is not out of the question but is still data dependent. The March quarter CPI to be released on 26 April will be critical, while a tight labour market and a 3.5% unemployment rate should keep the doves on edge and the hawks on the wing. Inflation risk remains tilted to the upside.

In addition, meaningful wage increases being demanded by unions cannot be ignored and sharply increased immigration numbers are already putting pressure on rental rates and housing stock. Falling house prices are tending to bottom, which will also provide some support to an eroding wealth effect.

An increase in May is more likely than not and ‘higher for longer’ remains the base case.


Peter Warnes is Head of Equities Research, Morningstar Australasia, Morningstar Australia, “This time it is different – Record low unemployment, despite sky-rocketing interest rates” 16 April 2023