This article is from the source 'guardian' and was first published or seen on . The next check for changes will be
You can find the current article at its original source at https://www.theguardian.com/australia-news/2025/jul/30/the-politics-of-falling-inflation-has-been-clear-lower-is-better-but-we-should-beware-its-flip-side-slow-growth
The article has changed 3 times. There is an RSS feed of changes available.
| Version 0 | Version 1 |
|---|---|
| The politics of falling inflation has been clear – lower is better. But Australia should beware its flip side: slow growth | |
| (32 minutes later) | |
| There’s no convincing argument for the RBA not to cut interest rates on 12 August as economists say they are acting as a break on the economy | There’s no convincing argument for the RBA not to cut interest rates on 12 August as economists say they are acting as a break on the economy |
| Follow our Australia news live blog for latest updates | Follow our Australia news live blog for latest updates |
| Get our breaking news email, free app or daily news podcast | Get our breaking news email, free app or daily news podcast |
| There is much to like in the latest inflation figures, which dropped to 2.1% in the year to June – and even to 1.9%, if you believe the less reliable monthly version. | There is much to like in the latest inflation figures, which dropped to 2.1% in the year to June – and even to 1.9%, if you believe the less reliable monthly version. |
| We have certainly come a long way in the two-and-a-half years since inflation reached nearly 8%. | We have certainly come a long way in the two-and-a-half years since inflation reached nearly 8%. |
| The most obvious takeaway is that the Reserve Bank board will surely cut the cash rate on 12 August. | The most obvious takeaway is that the Reserve Bank board will surely cut the cash rate on 12 August. |
| Michele Bullock, the central bank’s governor, had previously made it clear that the holdouts on the monetary policy board were waiting for more comfort that inflation was tracking as expected. They have that now. | Michele Bullock, the central bank’s governor, had previously made it clear that the holdouts on the monetary policy board were waiting for more comfort that inflation was tracking as expected. They have that now. |
| Notably, the central bank’s preferred “underlying” inflation rate also eased, from 2.9% to 2.7%. That measure excludes volatile movements in the price of things such as petrol, fruit and vegetables and electricity, and it is in line with where the RBA’s economists thought it would be. | Notably, the central bank’s preferred “underlying” inflation rate also eased, from 2.9% to 2.7%. That measure excludes volatile movements in the price of things such as petrol, fruit and vegetables and electricity, and it is in line with where the RBA’s economists thought it would be. |
| So, really, there’s no convincing argument to not cut rates (besides its impact on a rapidly reheating housing market). | So, really, there’s no convincing argument to not cut rates (besides its impact on a rapidly reheating housing market). |
| Sign up: AU Breaking News email | Sign up: AU Breaking News email |
| Economists agree. Stephen Smith, a partner at Deloitte Access Economics, said that interest rates were acting as a break on the economy, and that this was “hard to justify given ongoing global economic volatility and the continued sluggishness of our own domestic economy”. | Economists agree. Stephen Smith, a partner at Deloitte Access Economics, said that interest rates were acting as a break on the economy, and that this was “hard to justify given ongoing global economic volatility and the continued sluggishness of our own domestic economy”. |
| After making high inflation public enemy number one during Labor’s first term of government, it was no wonder Jim Chalmers hailed the ABS’s latest consumer price report as “stunning” and “absolutely outstanding”. | After making high inflation public enemy number one during Labor’s first term of government, it was no wonder Jim Chalmers hailed the ABS’s latest consumer price report as “stunning” and “absolutely outstanding”. |
| The upcoming economic reform roundtable is occupying much of the treasurer’s attention, so of course he would prefer not to be forced into fighting a rear guard action against yesterday’s villain. | The upcoming economic reform roundtable is occupying much of the treasurer’s attention, so of course he would prefer not to be forced into fighting a rear guard action against yesterday’s villain. |
| But another is looming on the horizon. | But another is looming on the horizon. |
| The politics and economics of falling inflation has been clear: lower is better. It is worth remembering, however, the other side to low inflation, which is slow growth. | The politics and economics of falling inflation has been clear: lower is better. It is worth remembering, however, the other side to low inflation, which is slow growth. |
| The Australian economy expanded by just 0.2% through the first three months of this year, while annual growth stalled at 1.3%. Households are wary of opening their wallets, which has dragged on consumption in 2025. Growth in government spending, which propped up activity in 2024, is waning. | The Australian economy expanded by just 0.2% through the first three months of this year, while annual growth stalled at 1.3%. Households are wary of opening their wallets, which has dragged on consumption in 2025. Growth in government spending, which propped up activity in 2024, is waning. |
| Sign up to Breaking News Australia | Sign up to Breaking News Australia |
| Get the most important news as it breaks | Get the most important news as it breaks |
| after newsletter promotion | after newsletter promotion |
| So does that make an inflation rate of just 2% unalloyed good news, or a bit of a worry? | So does that make an inflation rate of just 2% unalloyed good news, or a bit of a worry? |
| “Clearly, our economy is not growing as quickly as we would like,” Chalmers acknowledged during a doorstop in parliament house. | “Clearly, our economy is not growing as quickly as we would like,” Chalmers acknowledged during a doorstop in parliament house. |
| “We are attentive to those cyclical issues [such as] weaker growth, getting on top of inflation,” Chalmers said. | “We are attentive to those cyclical issues [such as] weaker growth, getting on top of inflation,” Chalmers said. |
| “But we’re also increasingly focused on the bigger structural issues – productivity growth in our economy, the intergenerational challenge.” | “But we’re also increasingly focused on the bigger structural issues – productivity growth in our economy, the intergenerational challenge.” |
| As much as he would like to focus on the future, the last thing we need as a country is to get mired in the low-growth, low-inflation, low-wage world that preceded the pandemic. | As much as he would like to focus on the future, the last thing we need as a country is to get mired in the low-growth, low-inflation, low-wage world that preceded the pandemic. |
| The economic implications of disinflation may be changing, and the political implications with it. | The economic implications of disinflation may be changing, and the political implications with it. |