Growth in overall household and public consumption in the March quarter had been stronger than expected while other components had surprised on the downside.
The level of consumer spending over the preceding 18 months had been revised upwards. Much of the upside surprise had been driven by large revisions to overseas travel, which were recorded as imports and so did not alter the measure of overall GDP.
Estimates of household income had been little changed, implying downward revisions to estimates of the saving rate. These revisions had brought consumption growth more into line with the usual historical relationships with household income and wealth.
Energy rebates and rent assistance would lower headline inflation in 2024, though this direct effect would be reversed later in 2025.
The labor market was still assessed as tight relative to full employment, though conditions had continued to ease gradually in recent months as expected.
The easing in the labor market since late 2022 had occurred through an increase in the unemployment rate, a decline in average hours worked and fewer job vacancies.
Recent employment growth had been supported by growth in industries where public funding was important.
Wages growth had likely passed its peak for the current cycle.
The easing in wages growth over the year to the March quarter had been broadly based, but outcomes in public and private enterprise bargaining agreements had been a little below expectations.
Nonetheless, it was too early to determine if this signaled a more rapid easing in aggregate wages growth than currently expected.
Firms were continuing to report upward pressure on costs, stemming from a range of sources.
Firms in consumer-facing industries were reporting that it was becoming more difficult to raise prices, resulting in a narrowing of margins.
Inflation remained above the target range and had been a little higher than expected in prior months.
The monthly CPI indicator for April had exceeded expectations because of stronger-than-expected durable goods price inflation. However, there had been limited information about market services price inflation since the May meeting.
Members judged that longer term inflation expectations in Australia were still anchored but should continue to be monitored closely.
Several measures of inflation expectations had drifted up in recent years to be around the midpoint of the target band, after having been below target during the low-inflation period prior to the pandemic.