Reserve Bank chief Michele Bullock has used a speech to spell out why Australia’s central bank is yet to cut interest rates despite easing starting in Canada, New Zealand and other peer economies.

Central banks already cutting interest rates are only softening interest rate brakes rather than hitting accelerators, Ms Bullock says, while explaining why borrowers are waiting longer for repayment relief.

“Recently, I have been asked why other central banks are lowering interest rates,” she said during the CEDA’s Annual Dinner address.

“To explain this, I need to describe what the board is trying to achieve and ways in which we seem to be a little different from some other peer economies.”

All central banks care about inflation and the jobs market, Ms Bullock said, but Australia’s emphasis on the latter stopped interest rates going so high in the first place.

“Indeed, Australia’s labour market conditions appear unusually tight, relative to those in other peer economies,” she said.

“Conditions in labour markets in those economies have eased significantly and unemployment has increased, such that labour markets are now assessed to be close to balance or have spare capacity.”

Australia’s interest rate has remained stuck at 4.35 per cent for the past 13 months as households navigate a cost-of-living crisis.

Most economists don’t expect a rate cut until at least February.

Australia’s unemployment rate has held at 4.1 per cent for three months in a row and remains low compared to historical norms.

In addition, monthly job creation has consistently beat expectations.

“Given the tightness in Australia’s labour market, along with our assessment that the level of demand still exceeds supply in the broader economy, we expect it will take a little longer for inflation to settle at target in Australia,” Ms Bullock explained on Thursday.

Further, central banks cutting interest rates are only planning to remove “some” restrictiveness.

“That is, central banks globally are still pushing against high inflation despite pulling back on the extent of restrictiveness somewhat,” Ms Bullock said.

Her remarks follow October inflation numbers, which are not as comprehensive as quarterly figures but still provide insights into price pressures.

The monthly gauge’s measure of trimmed mean came in at 3.5 per cent, a level economists viewed as still too elevated to be consistent with a rate cut at the next RBA meeting in December.

Yet with inflation broadly travelling in the right direction, expectations are the next move will be down though the timing of cuts remains uncertain. 

Of late, markets have pushed out expectations for the first cut from February to March.

This post was originally published on Michael West.