Received

The head of the Reserve Bank says interest rates are now in restrictive territory and the bank has an open mind about pausing interest rates at the next meeting.

But he says "further tightening of monetary policy" is still likely to ensure high inflation is only temporary.

In a speech following the 10th consecutive interest rate rise to counter high inflation, RBA governor Philip Lowe said the "more recent rate increases" had moved interest rates into restrictive territory, which is where monetary policy is high enough to slow growth in the economy.

The earlier increases, he said, were necessary to remove the "extraordinary policy support" handed out during the pandemic.

Dr Lowe told the Australian Financial Review's Business Summit in Sydney the board discussed the timing of keeping interest rates on hold when it met on Tuesday afternoon.

"At our board meeting yesterday, we discussed the lags in monetary policy, the effects of the large cumulative increase in interest rates since May and the difficulties that higher interest rates are causing for many households," he said.

"We also discussed that, with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases to allow more time to assess the state of the economy."

He said the timing of a pause would depend on incoming data and the board's assessment of the outlook.

Ahead of the April meeting, the board will need to digest more data on employment, inflation, retail spending and business conditions and sentiment.

"We've got a completely open mind about what happens at the next board meeting," he said.

Dr Lowe also recycled his phrasing about the potential for further monetary tightening from his statement on the interest rate decision on Tuesday.

Analysts have speculated the evolution from "further interest rate increases" at the February meeting to "further tightening of monetary policy" in March suggests the bank is softening its rhetoric in preparation for a pause.

Dr Lowe also commented on the complex economic environment the bank was working with, with many of the usual variables at record highs or record lows.

On Tuesday, the RBA raised the official cash rate by 25 basis points to 3.6 per cent.

The central bank has been lifting interest rates since May last year to tackle inflation, which came in at 7.8 per cent in the December quarter - its highest level since 1990.

But the monthly consumer price index, which is still experimental and can be volatile month to month, showed inflation falling from 8.4 per cent in December to 7.4 per cent in January.

Dr Lowe said the monthly result needed to be viewed cautiously but the whole percentage point decline was "very welcome", as were the promising signs of a slower rate of goods price inflation in Australia.

He also commented on recent data that has challenged the narrative that advanced economies, including the US, had turned a corner on inflation and economic growth, and said it served as a "cautionary lesson" for Australia.

But he said Australia was in a better position than other advanced economies due to high employment levels, wage growth that's "still not too high", and the large share of variable rate mortgages, which are sensitive to interest rate movements.

© AAP 2023

The Reserve Bank is moving closer to hitting "pause" on interest rate rises as households struggle with rapid-fire increases to borrowing costs.

But governor Philip Lowe says further tightening of its monetary policy is still likely to ensure high inflation is only temporary.

In a speech following the 10th consecutive rise in the official cash rate, Dr Lowe said the RBA board discussed the timing of putting rate rises on hold and the financial pain being felt by borrowers during its last meeting.

"We discussed the lags in monetary policy, the effects of the large cumulative increase in interest rates since May and the difficulties that higher interest rates are causing for many households," he said.

"We also discussed that, with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause ... increases to allow more time to assess the state of the economy."

Dr Lowe also recycled his toned-down phrasing about the potential for further monetary tightening from his Tuesday statement on the March rate decision.

Analysts have speculated a recent evolution in the RBA's language - from flagging further interest rate rises in the coming months to less-specific plans for tighter monetary policy - gives the central bank space to pause or hike just once more.

Ahead of the April meeting, the board will need to digest more data on employment, inflation, retail spending and business conditions and sentiment.

Dr Lowe said the board had a "completely open mind" about April and if key data collectively built the case for a pause, the RBA was prepared to hold.

But NAB markets economist Taylor Nugent said the data would need to be a lot softer than expected to make the case for stopping the rates rises given the governor expected more measures will be needed to stem inflation.

He said if employment rebounded from the seasonal factors that likely influenced a weak January result, a hike in April is likely.

"A pause in April or May is a real possibility, though NAB continues to see the RBA hiking in April and May, taking the cash rate to 4.1 per cent," Mr Nugent said.

Commonwealth Bank economists are also sticking with their base case - one more hike in April - despite the "less hawkish" tilt adopted by the governor.

The central bank has been lifting interest rates since May last year to tackle inflation, which came in at 7.8 per cent in the December quarter - its highest level since 1990.

But the monthly consumer price index, which is still experimental and can be volatile month to month, showed inflation falling from 8.4 per cent in December to 7.4 per cent in January.

Dr Lowe said the monthly result needed to be viewed cautiously but the one percentage point decline was "very welcome" as were promising signs of a slower rate of goods price inflation.

He said it was still possible to return inflation back to within its two-three per cent target range without causing a spike in unemployment.

"We could be knocked off that narrow path but our ambition is to bring inflation down within a reasonable time and to preserve many of the gains in the labour market."

© AAP 2023

Anthony Albanese is jetting off to India in a bid to bowl over New Delhi and boost the bilateral relationship.

The prime minister will lead a delegation of Australia's top business people as well as trade and resources ministers as the federal government attempts to increase economic and security partnerships with India.

The delegation includes representatives from sectors including mining, energy, aviation, education and finance.

Discussions are set to focus on renewable energy, defence co-operation and education ties.

Deakin University will open a new campus in India and become the first foreign university to set up a physical campus in the populous nation.

Universities Australia chief executive Catriona Jackson says increased research collaboration between the two nations is a priority as the relationship continues to "move ahead in leaps and bounds".

"This will support India's hugely ambitious education reforms," she said of the new campus.

The announcement will be made at an event in Ahmedabad that will be attended by Ms Jackson, Mr Albanese, Deakin University's chancellor and vice-chancellor and senior Indian ministers.

Deakin will invest an initial $4 million for 100 students to study cyber security and business analytics each year.

The University of Melbourne is also working towards a dual science degree with three Indian universities.

The trip will also focus on economic and trading ties.

Commonwealth Bank CEO Matt Comyn said it's a significant opportunity to build on already strong economic ties with India being Australia's sixth-largest trading partner and fourth-largest export market.

"Australia and India have enjoyed strong economic, social and cultural ties going back over many decades," he told AAP.

"We have many shared interests in working together even more closely, especially in sectors such as digital technologies, financial services, education and renewable energy."

The prime minister says there is room to improve the relationship with both nations sharing a rich history.

"We're bound by our democratic values and enlivened by genuine friendship," he said.

"But also ... a fierce sporting rivalry," he said, hoping that his Indian tour fares better than the Australian cricket team.

Mr Albanese is also hoping for a smoother ride than his first trip three decades ago.

"The first time I went there was with a backpack in 1991, catching buses, hitching rides, catching trains," he said.

"It will be a lot different this time, I suspect."

Opposition Leader Peter Dutton also lauded not only the strong defence and trade ties, but also the people-to-people links that have emerged between the two nations.

The prime minister will visit Mumbai, New Delhi and Ahmedabad and attend the fourth Test between the two nations alongside his Indian counterpart Narendra Modi.

© AAP 2023