RBA Models Show Sharp Downgrade to Neutral Rate Estimate

The Reserve Bank of Australia’s model of the neutral cash rate implies a “significant downward revision” to its estimates while the job market is seen as tighter than previously thought, according to internal documents released Thursday under a Freedom of Information Act request.

The RBA’s model showed in March that the neutral rate was at 2.9% in mid-2024, about 0.7 percentage point lower than its previous estimate of 3.6% in that period, the research notes provided to Bloomberg showed this week.