By Chris Becker
The RBA minutes are out and you can feel the love returning. Although much of the discussion is unchanged, the sections on China and fiscal consolidation are more dour and the confidence in rebalancing is waning:
The global data released over the past month suggested that the pace of growth in Australia’s major trading partners had remained close to its long-run average. In China, growth in a range of key indicators had been running at a somewhat slower pace than over the course of 2013, with outcomes having been a little mixed of late. Growth in industrial production increased a touch in March and April, and PMIs picked up in May, while, in contrast, a range of other indicators, including various measures of freight, had shown more moderate growth than in 2013. The slower growth in residential investment was consistent with the broad-based decline in residential property inflation and transaction volumes over recent months. While there had been a number of reports that the extent of overbuilding had been greater in smaller cities, the decline in price inflation and downturn in sales were larger in the biggest cities, which had earlier experienced a more pronounced increase in prices and sales.
…The 2014/15 federal budget estimated that the deficit would narrow by slightly more over the next two years than estimated in the 2013/14 Mid-year Economic and Fiscal Outlook. Members observed that the change in the budget position over the next couple of years was forecast to proceed at a similar rate to earlier episodes of fiscal consolidation. Beyond that horizon, the budget implied a more substantial fiscal consolidation than had earlier been projected.
…Resource exports grew very strongly in the March quarter. Iron ore exports had continued to grow in April, while coal exports had declined somewhat. Private non-residential building approvals had continued to trend lower, although the high level of work yet to be done was likely to sustain construction activity for some time. The ABS capital expenditure survey for the March quarter suggested that mining investment fell in the quarter, while non-mining business investment appeared to have increased a little. Looking ahead, firms’ investment intentions implied that mining investment would fall quite sharply over the course of 2014/15, but the same survey pointed to a modest increase in non-mining investment over this period. Surveys of business conditions and confidence in April remained around their long-run average levels. In the Bank’s liaison, non-mining firms continued to report a reluctance to commit to significant new investment projects until they saw a sustained improvement in demand conditions.
Following the release of the monthly RBA Minutes this morning at 11.30, the local currency has cracked through a three day low below 94 cents against the USD:
