Contents of the Monetary Policy Circular Letter from the Reverse Bank Board

International Economic Development 

We have managed to summarize the latest monetary policy through the rba.gov.au website where members discuss international economic developments by noting that world inflation is still high, but it seems to have reached its peak.

Goods inflation has slowed markedly in many developed countries as supply chains and other usual pressures have eased. However, inflation in terms of services is still high. Lower demand prospect growth is expected to reduce inflation in services and goods over time. Although wage growth in some developed countries has been well above average in recent years, there is speculation that it may also have peaked for some countries. Members observed that the significant development for the global outlook was a reversal of China's pandemic containment policy in mid-December 2022. Disruptions from the final phase of restrictions in November and the virus wave in December have led to a weakening of activity in the country in the December period. However, early signs are that population mobility and economic activity recovered quickly in January. 

Domestic Economic Development

Members observed that domestic inflation was still high and broad-based at the end of 2022. Headline inflation has reached 7.8% for the whole year to the December quarter. The average cut inflation reached 6.9% for the same period, this data was higher than expected. While global inflationary pressures have begun to ease, easing inflation is expected over the next few months. Although domestic demand strengthened in some areas and continued to push prices up. Members also observed that the December quarterly inflation results showed a more fundamental short-term domestic inflationary pressure compared to the previous forecast, which was reflected in the revised forecast. 

Furthermore, the headline outlook and revised core inflation were slightly lower, reflecting the expected effect of the Australian Government's Energy Price Assistance Plan to mitigate some of the rising energy costs. Members noted that wage growth continued to increase. Private wage sector growth strengthened from expectations in September and results strengthened from the previous forecast for December. This is supported by information from the liaison contact. It is noted that data on about 1/3 of private sector companies reported their wage increases above 5%. The Wage Price Index grew by around 4 ¼ % at the end of 2023, previously falling by around 3 ¾% in mid-2025 due to labor market factors that are starting to subside. The record said that about ⅓ of private sector companies reported their wage increases of up to more than 5%.