Capacity constraints remain binding. Demand is too strong. And without changes to fiscal and structural policy, interest rates will remain the primary lever — regardless of the political cost.

The consumer price index was the last major piece of data before the Reserve Bank meeting on Melbourne Cup day.

Families are still under pressure, yet the rise in spending suggests confidence is returning and lower interest rates are starting to help.

Benign quarterly inflation figures from the Australian Bureau of Statistics – showing headline inflation at 2.1% and underlying inflation at 2.7%

By holding steady, the bank is signalling it is not yet fully convinced inflation is returning to target and is prepared to wait for further evidence before cutting again.

Businesses report that weak demand limits their ability to pass on cost increases, and labour market indicators remain mixed

The reforms will create two separate boards for the Reserve Bank of Australia (RBA) – one will be focused on monetary policy, the other on governance.

This widely expected move leaves homeowners facing the 13-year high cash rate at least until November 5, when the next RBA board meeting is scheduled.

Australia started raising interest rates when inflation reached about the same level as the other countries, but increased them by much less, by 4.25 percentage points, compared for example to 5.25 points in the United States.

A rate of 3.8% is what the Reserve Bank had forecast. It is in line with market expectations, and well down on the 6% recorded this time last year.