RBA holds assertively

No hint of easing here:

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

Conditions in the global economy have improved over recent months. Business and consumer confidence have both picked up. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. In China, growth was stronger over the second half of 2016, supported by higher spending on infrastructure and property construction. This composition of growth and the rapid increase in borrowing mean that the medium-term risks to Chinese growth remain. The improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia’s national income.

Headline inflation rates have moved higher in most countries, partly reflecting the higher commodity prices. Long-term bond yields have also moved higher, although in a historical context they remain low. Interest rates have increased in the United States and there is no longer an expectation of further monetary easing in other major economies. Financial markets have been functioning effectively and stock markets have mostly risen.

In Australia, the economy is continuing its transition following the end of the mining investment boom. GDP was weaker than expected in the September quarter, largely reflecting temporary factors. A return to reasonable growth is expected in the December quarter.

The Bank’s central scenario remains for economic growth to be around 3 per cent over the next couple of years. Growth will be boosted by further increases in resource exports and by the period of declining mining investment coming to an end. Consumption growth is expected to pick up from recent outcomes, but to remain moderate. Some further pick-up in non-mining business investment is also expected.

The outlook continues to be supported by the low level of interest rates. Financial institutions remain in a position to lend. The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment.

Labour market indicators continue to be mixed and there is considerable variation in employment outcomes across the country. The unemployment rate has moved a little higher recently, but growth in full-time employment turned positive late in 2016. The forward-looking indicators point to continued expansion in employment over the period ahead.

Inflation remains quite low. The December quarter outcome was as expected, with both headline and underlying inflation of around 1½ per cent. The Bank’s inflation forecasts are largely unchanged. The continuing subdued growth in labour costs means that inflation is expected to remain low for some time. Headline inflation is expected to pick up over the course of 2017 to be above 2 per cent, with the rise in underlying inflation expected to be a bit more gradual.

Conditions in the housing market vary considerably around the country. In some markets, conditions have strengthened further and prices are rising briskly. In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Growth in rents is the slowest for a couple of decades. Borrowing for housing has picked up a little, with stronger demand by investors. With leverage increasing, supervisory measures have strengthened lending standards and some lenders are taking a more cautious attitude to lending in certain segments.

Taking account of the available information, and having eased monetary policy in 2016, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Backbone Phil will have to learn the hard way. Economic growth around 3%, since when?


Even the 10 year moving average is closer to 2.5%:



  1. “Growth will be boosted by further increases in resource exports and by the period of declining mining investment coming to an end” …….. Do I interpret that as they think that mining investment is going to pick up ? And that growth …. wow we are awesome …Buy Australia !!

    • Pick up in exports and slow in imports of capital goods for mining….we are looking forward to improving balance of trade …go AUD

  2. “GDP was weaker than expected in the September quarter, largely reflecting temporary factors” – whats temporary about car manufacturing closing down, the housing boom or decaying infrastructure. It looks like Phil Lowe has many traits of his predecessor Glen Stevens – arrogance, stupidity and incompetence. GDP wasn’t just weaker, it reversed in a big way 0.5% – seriously what part of negative don’t these idiots understand.

    Monetary policy will not sort out the housing issue in Sydney or Melbourne. There needs to be a capital gains tax on housing, tigher prudential measures and withholding tax on interest paid to offshore lenders. i.e. fiscal policies not monetary ones.

    Meanwhile Australia languishes with an ongoing 40 year Capital account deficient and uncontrolled government debt despite the biggest mining boom in its history, record immigration and compulsory superannuation.

    The arrogant pricks won’t even jawbone the dollar, so the AUD will be off to 80 cents thus continuing the suffocation of our manufacturing and tourism sectors – two industries that are capable of employing many people.

  3. If Q4 GDP prints negative he’ll have to cut. He’s counting on the commodity price boom saving him.

  4. Even if it does print positive, the way I see it, if it is below 0.5 then effectively we are still in a technical recession because the cumulative figure will still be negative.

    These guys are way out of touch – the lunatics are running the asylum.

  5. I would like to make comment about BankWest,

    Its been a rather common theme lately for bankwest customers to begrudge their bank.

    One customer, a friend of mine with prime real-estate holdings in excess of 50mil~ with a business turn over of over 80mil P/A is holding 6millilon in debt with the bank and is being threatened with receivership if his situation doesn’t improve with in a few months.

    His business is being choked, numerous employees have been fired to appease the bank and yet they are demanding more efforts to reduce debt.

    Another anecdotal story a friend arranged to withdraw $80,000 in cash savings, he gave advance warning he was wanting to withdraw and every time he went to the bank he was knocked back for the tiniest things.

    He is only allowed to withdraw $10,000 a week in cash, let’s just say he is a very irate person currently.

    I’ve noted before on MB that There is something odd happening with BW.

    It paints a grim picture if you Add into the mix that the CEO resigned in december and now investor mortgages have been halted.

    Just how much can CBA distant itself from its subsidiary?

    • Your mates loan must be secured on the business and not the real estate. BW Building Society (and al their mates) get nervous lending to business. Much better lend to loss-making little landlords.

      Hope they put the dude in receivership and wind the whole thing up. The last thing this country needs is businesses, especially if it’s exports. Takes precious attention and debt funding away from the domestic house trading sector.

      • Sadly it is exports. He has about 5 million in sales to a very large chain store in the UAE on 60 day payment terms.

        He recently ceased exports because he can’t extend his over draft. The customer in UAE has a better credit rating than BankWest.

    • This makes no sense. If he has $50M in RE and $6M debt on the business, a line of credit secured against the RE would be more than feasible. Why would you forego sales as you have run out of cash with such a large asset base. My only guess if the bank is taking such strong action is your friend has failed to inform you he has $40M debt against the RE.

      • Bad year for his business, group made small loss, bank assumes he will not be able to pay down principal going forward.

        Bank sees him and his business as a bad debt. Assets are great but they aren’t liquid cash.

        The point is the bank is just tightening screws.

        If the proverbial hits the fan and his property can’t be redeemed for cash then how does his loan get paid off? Thats what it boils down to in my opinion.

    • proofreadersMEMBER

      “Just how much can CBA distant itself from its subsidiary?”

      Probably not much, as Bankwest would now seem to be just a division of CBA per se and not a subsidiary – so, CBA would prima facie have to “take any knock to the chin”?

    • Lols, I wonder if it’s because they can’t sell them for what they bought them for and would have to report a loss.

      Or because they don’t want to compete with new RMBS fundraising drive up the price/reduce volume.

      Either way – slippery housing bubble boosting bastards (SHBBBs)!

    • Reusa, you need to toe the line mate. There are “no houses to snap up” because the issue right now is “insufficient supply” which can be solved by “selling more land to land bankers *cough* I mean developers”. Now obviously developers are struggling a bit because of insufficient land, so we need to lower the rates to reduce their costs of business when taking on loans to land bank *cough* develop.

  6. “In Australia, the economy is continuing its transition following the end of the mining investment boom”

    = “Property continues to skyrocket as our primary non-mining export commodity”

    Lower teh rates!

    Don’t Raise Now

  7. Jumping jack flash

    Well, I don’t know much, but the fact that those graphs, above, are all flat or pointing downwards looks to be from a severe debt deficiency. So we will probably need to lower the rates soon. And/or some kind of property buying incentives to start accelerating debt growth again.

    Debt growth = economic growth. Therefore the bigger the debt, the bigger the economy. We’ll all get even more rich on (someone else’s) debt.

    Nothing to worry about, she’ll be right, all under control.