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RBA discussed upside and downside scenarios in SoMP

In the Statement on Monetary Policy, RBA reiterated that it’s “committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target”. The conditions for raising the cast rate is unlikely to be met “until 2024 at the earliest”.

RBA also discussed both an upside and a downside scenario. In the upside scenario, stronger household consumption and reduced uncertainty about the outlook would “underpin faster growth in business investment and employment” and “puts additional downward pressure on the unemployment rate”. Unemployment would fall below 4%, and inflation back within target range by mid-2023.

On the other hand, in the downside scenario, household prefer to continue strengthening their balance sheets. Lower consumption growth would weigh on business income, and prompting delay in investment, as well as slower employment growth. Unemployment rate will remain at around 5.25-5.50%, while underlying inflation will remain below 2%.

Full SoMP here.

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