The Reserve Bank of Australia has failed to reduce interest rates despite strong trend improvements in inflation.
At its meetings today, the RBA said the cash rate target would remain at 4.1 percent.
It said it still needed to be confident that progress to reduce inflation to the midpoint of the target band (two to three percent) was sustainable.
It was therefore “cautious about the outlook”.
The decision came as new figures showed that retail spending remained sluggish. Seasonally adjusted retail turnover rose just 0.2 percent in February 2025.
This followed a rise of 0.3 per cent in January 2025 and a fall of 0.2 percent in December 2024.
In a statement, the RBA said inflation had fallen substantially since the peak in 2022. Recent information available to the bank pointed to continuing improvements.
“Private domestic demand appears to be recovering, real household incomes have picked up and there has been an easing in some measures of financial stress,” the RBA said.
“However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices.
“At the same time, a range of indicators suggest that labour market conditions remain tight. Wage pressures have eased a little more than expected but productivity growth has not picked up and growth in unit labour costs remains high.”
The statement said sustainably returning inflation to target within a reasonable timeframe was the Board’s highest priority.
The continued decline in underlying inflation was welcome, but there remained risks, and the bank was cautious about the outlook.
The ABS retail trade figures showed mixed results across industries.
ABS head of business statistics Robert Ewing said food-related spending drove the rise in retail turnover in February.
Both food retailing (+0.6 percent) and cafes, restaurants and takeaway food services (+0.2 percent) rose for a second straight month.
Household goods retailing (-0.3 percent) dropped for a second straight month.
This was partly offset by spending growth in department stores (+1.5 percent) and clothing, footwear and personal accessory retailing (+0.4 percent).
Spending was up in most states and territories but Queensland was an outlier with a 0.4 percent drop. Tasmania was also down 0.5 percent.
The full retail trade report is on the ABS website.
