Economist on RBA Decision (with Heidi Stradwatt)

Asks about inflation picture given signs of softening in labor market.

Heidi Stradwatt

James McIntyre

Inflation still too high, RBA characterized that in May and likely will again. But inflation is easing back. Government efforts in April inflation data - cutting taxes and securing fuel supply - helped. Fuel price in Australia last week was below where it was before war started.

Economic surprise index for Australia deeply negative over last month or two. Things have been weakening and softening up. Inflation was softer than expected.

Asks how much influenced by property market expectations following budget.

Heidi Stradwatt

James McIntyre

Big slowing in property market. Post-budget there has been exacerbation of softening evident since November, gathering speed in February/March after initial rate cuts. Three rate cuts now plus uncertainty from tax changes creates real risk of exacerbation of downward spiral.

Big negative wealth effect coming through, hitting residential construction activity and whole range of sectors. RBA needs to be conscious of this - if they talk tough on inflation they could scare property market that is already softening.

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