The Reserve Bank has kept interest rates on hold at 4.35 per cent.
The cash rate target has been steady for seven months now.
Interest rates will remain at this level for another six weeks at least, until the RBA Board's next meeting in early August.
The majority of market economists surveyed ahead of Tuesday's decision expected the RBA to keep rates on hold, so it hasn't surprised anyone.
It comes after recent data showed the trend unemployment rate ticked up in May, from 3.9 per cent to 4.0 per cent, which is its highest level in two years.
Economists said the slight increase in unemployment in May tracked the RBA's forecasts well, and monetary policy appeared to be having the intended dampening impact on Australia's economy.
In a statement accompanying Tuesday's decision, the RBA Board indicated that unemployment will have to rise further to make sure inflation definitely comes down.
"Broader data indicate continuing excess demand in the economy, coupled with elevated domestic cost pressures, for both labour and non-labour inputs," the Board said.
"Conditions in the labour market eased further over the past month but remain tighter than is consistent with sustained full employment and inflation at target.
"Wages growth appears to have peaked but is still above the level that can be sustained given trend productivity growth," it said.
It said the pace of the decline in the inflation rate had also slowed recently.
"Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance," the Board said.
"But the pace of decline has slowed in the most recent data, with inflation still some way above the midpoint of the 2–3 per cent target range.
"Over the year to April, the monthly consumer price index (CPI) indicator rose by 3.6 per cent in headline terms, and by 4.1 per cent excluding volatile items and holiday travel, which was similar to its pace in December 2023.
"The Board expects that it will be some time yet before inflation is sustainably in the target range," it said.
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