Overview

• The Reserve Bank’s board voted 6-3 to hold the cash rate at 3.85%, defying market expectations of a July cut
• Deputy Governor Andrew Hauser described the combination of higher trade tariffs, slowing productivity and climate risks as “unprecedented” challenges for Australia’s economy
• Hauser called for fresh macroeconomic research to devise policy measures that preserve living standards, drawing on past breakthroughs after the Great Depression and the 1970s recession
• The Productivity Commission warned that escalating US tariffs on key partners such as Japan and South Korea could curtail investment and harm household welfare
• Hauser highlighted the productivity slowdown as a profound threat and noted collaboration between the RBA, Treasury and academic institutions is underway to diagnose its causes