The RBA minutes are out and feel pretty dated already. Here’s the conclusion:
Members noted that there had been little change in the outlook for the global economy, with growth of Australia’s major trading partners in the year ahead still forecast to be around average. The latest data received on the domestic economy had evolved much as expected, with further indications that growth had picked up a little over the past two quarters. This had been driven by very strong exports as well as an increase in the growth of consumption and dwelling investment. However, the Board noted that overall growth in coming quarters was likely to be below trend given expected slower growth in exports, the decline in mining investment and the planned fiscal consolidation.
While a range of indicators suggested that conditions in the labour market had improved in recent months, the demand for labour remained subdued and was likely to remain so for some time. This had led to lower wage growth, which in turn had seen inflation decline for non-tradable items whose prices were more sensitive to labour costs. This was being offset by stronger inflation for tradable items as a result of the depreciation of the exchange rate over the previous year. Inflation was consistent with the target and was forecast to remain so over the next couple of years.
At recent meetings, the Board had judged that it was prudent to leave the cash rate unchanged. The expansionary setting of monetary policy continued to have the expected effects on economic activity. Notably, a sustained increase in dwelling investment was in prospect, consumption had strengthened a little and business conditions were around average levels. Recent developments had indicated that the economy had evolved broadly in line with earlier expectations, resulting in little change in the updated forecasts for activity and inflation. With growth in activity expected to pick up only gradually, and spare capacity in the labour market consequently remaining for some time, growth in domestic costs was forecast to remain contained, which would help to offset the ongoing effect on prices from the depreciation of the exchange rate over the past year. Given this outlook for the economy and the significant degree of monetary stimulus already in place to support economic activity, the Board considered that the current accommodative stance of policy was likely to be appropriate for some time yet.
Nothing new there but the dollar sank 30 pips anyway to 93 cents. Any excuse to sell now?
