Slowdown in activity not due to supply shortages

Some commentators have been arguing that the recent weakness in economic activity reflects a shortfall of supply rather than weaker demand. However, business surveys suggest that supply constraints have lessened and that capacity utilisation has fallen just as much as one would expect given the slowdown in demand. The upshot is that tighter monetary policy is working, but we'll find out next week whether that is dampening inflation sufficiently to prevent another RBA rate hike.