RBA holds, yawn

The RBA is out with its latest hold. The statement:

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

The global economic expansion is continuing and unemployment rates in most advanced economies are low. There are, however, some signs of a slowdown in global trade, partly stemming from ongoing trade tensions. Growth in China has slowed a little, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector. Globally, inflation remains low, although it has increased due to the earlier lift in oil prices and faster wages growth. A further pick-up in core inflation is expected given the tight labour markets and, in the United States, the sizeable fiscal stimulus.

Financial conditions in the advanced economies remain expansionary but have tightened somewhat. Equity prices have declined and credit spreads have moved a little higher. There has also been a broad-based appreciation of the US dollar this year. In Australia, money-market interest rates have declined, after increasing earlier in the year. Standard variable mortgage rates are a little higher than a few months ago and the rates charged to new borrowers for housing are generally lower than for outstanding loans.

The Australian economy is performing well. The central scenario is for GDP growth to average around 3½ per cent over this year and next, before slowing in 2020 due to slower growth in exports of resources. Business conditions are positive and non-mining business investment is expected to increase. Higher levels of public infrastructure investment are also supporting the economy, as is growth in resource exports. One continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low, debt levels are high and some asset prices have declined. The drought has led to difficult conditions in parts of the farm sector.

Australia’s terms of trade have increased over the past couple of years and have been stronger than earlier expected. This has helped boost national income. Most commodity prices have, however, declined recently, with oil prices falling significantly. The Australian dollar remains within the range that it has been in over the past two years on a trade-weighted basis.

The outlook for the labour market remains positive. The unemployment rate is 5 per cent, the lowest in six years. With the economy expected to continue to grow above trend, a further reduction in the unemployment rate is likely. The vacancy rate is high and there are reports of skills shortages in some areas. The stronger labour market has led to some pick-up in wages growth, which is a welcome development. The improvement in the economy should see some further lift in wages growth over time, although this is still expected to be a gradual process.

Inflation remains low and stable. Over the past year, CPI inflation was 1.9 per cent and in underlying terms inflation was 1¾ per cent. Inflation is expected to pick up over the next couple of years, with the pick-up likely to be gradual. The central scenario is for inflation to be 2¼ per cent in 2019 and a bit higher in the following year.

Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low. Credit conditions for some borrowers are tighter than they have been for some time, with some lenders having a reduced appetite to lend. The demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed. Growth in credit extended to owner-occupiers has eased to an annualised pace of 5–6 per cent. Mortgage rates remain low, with competition strongest for borrowers of high credit quality.

The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Comments

  1. Inflation to pick-up
    GDP to pick-up
    Unemployment to fall
    Wages to rise
    Easing Sydney and Melbourne property markets

    Translation: “Ava good Christmas!”

    No dovish turn in that.

    • CaptainFeatherSwordsGhostLivesOn

      RBA wish list…..in the absence of any observable data supporting said wishes.

    • Brenton
      I remember in 2007/8 around; the whole world were cutting into crisis and RBA were saying next move was up
      Even back then I thought are they taking LSD in the board meetings
      Can I ask a Q, do they really know the truth and are lying to us or are they really stupid ???

      The only 2 people ex RBA I see on TV Are Edwards and Bloxo and they seem genuinely dumb

      • I have absolutely no doubt that they know we’re in a bubble. It’s just a case of how they manage it… I don’t think anyone knows this, but Phil Lowe and a few others.

        20 years old, but at least this is from the man himself, when he was relatively free to voice his own opinion on the subject:

        There are two broad scenarios to consider. The asset-price bubble could burst in the
        near future or it could burst in the more distant future. If it bursts in the near future,
        there is likely to be a mild contraction in output, and inflation is likely to be below
        target. If on the other hand, the bubble survives and grows, there will be continuing
        expansionary effects on output and inflation. But eventually the bubble must burst,
        and when it does so, the collapse will be much larger with the potential to adversely
        affect the stability of the financial system. When this occurs we could expect a
        prolonged period of output below potential and inflation (substantially) below target.

        Now suppose that the central bank, can increase the likelihood of a bubble bursting
        by raising interest rates. In this case it may make sense for the central bank to do so
        early on in the life of the bubble, even though this will increase the likelihood of
        inflation being below target in the near term. This is desirable, however, because it
        also decreases the chance of the bubble continuing, and hence, of much more
        extreme outcomes for inflation and output in the longer term. Of course the path of
        interest rates will depend on many factors, including the probability of the bubble
        bursting of its own accord, the expected growth rate of a surviving bubble, the
        magnitude of the bubble’s direct effect on inflation, as well as the magnitude of the
        asymmetric effect of the bubble’s collapse on inflation through reductions in
        intermediated finance.

        https://pdfs.semanticscholar.org/0b08/ab8a071eae95253e1f8b72cc09f275f9a8d3.pdf

      • Do the brightest people go to the rba or earn much more elsewhere? Glenn Stevens worshipped an imaginary monster every Sunday. Lucy’s track record is tragic and she got promoted.

      • Do you think Glenn Stevens accidentally blew the bubble to it’s current extremes? I don’t. The sheer fact that he instigated the last cuts just before he exited the building speaks to a certain cunning. It ensured that the bubble would remain in tact well beyond the end of his tenure.

  2. These guys need to keep the illusion up. It’s all a con. The jig is up. Hopefully these scumbags are found out for who they really are

    • “The Australian economy is performing well”.
      Just make sure that sentence goes in there somewhere! What a bunch of professional BS spinners – it’s what the public service has become. Departments of spin (propaganda).

  3. It looks like the poo bobbed on the statement but DXY declined across the board at the same time. The poo probably didn’t move much because of the RBA’s cut and paste.

  4. Actual RBA meeting minutes.

    Chairman: Welcome everyone to our monthly board meeting. Have the minutes from last meeting been accepted.
    Drone 1: Yes, all accepted and returned.
    Chairman: Thankyou. Any outstanding Action items?
    Drone 2: No, All action items addressed.
    Chairman: Great work everyone.
    Collective Drones: Thankyou Sire.
    Chairman: So, Straight to the first item on the agenda. What reasons are we giving for not changing rates this month, Suggestions anyone?
    Drone 5: What? Are we not going to look at the data I supplied to show we need to raise rates immediately? Are we not even going to consider a course of action other than hold steady?
    Chairman: HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA.
    Collective Drones: HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA HA HA Ha HA Ha Ha HA HA
    Chairman: I so appreciate your sense of humour in these dark times……
    Drone 5: Thankyou sir, I am glad I can contribute….
    Chairman: Ok Now, lets get this over with, I have some Graft money to go spend………

    • Hmmm another who sees an inherent need to “raise rates immediately”. What for I don’t know but I assume you have an interest (lol) in having higher rates………………?

      • I was attempting to make a satirical comment on the way the RBA provides spurious reasons each month to justify inaction that under scrutiny dont seem to justify inaction.
        I dont have any skin in the game and picked raise instead of slash….randomly.

        That said, lowering rates is full of issues, we have a bubble and providing credit stimulus in order to sure up the property market when most outsiders already appear to think AUD is a bad investment…..will probably spook the chickens. US bond rates are already offering better than the current interbank rate, so sending any signal that we need to stimulate at the moment will likely send the interbank rate higher…. pushing rates up…. or forcing banks to have to foreclose to pay the debt down….

        Raising rates…. puts pressure on people to repay, reducing the economy leading to a crash…..

        Maybe the RBA cant do anything either way … I dont know, What I do know is they have sat on their hands while the bubble grew when they could have sent some positive signals to the market before the it burst, reducing the impacts…

        I dont know …. whats your take on it?

      • They are damned if they raise and damned if they reduce. I think they will sit pat as long as they can with enough measures to keep averaging out to “hold”. At the moment, like the lucky country, they are being a bit lucky where the dollar goes too high and Trump gooses it, and then it goes down and …………………Trump gooses it. Eventually their luck will be out and …………

  5. woman at work, house for sale 2hrs south of Sydney.
    started at $680k – no takers, $640k no takers, $600k no takers
    her estate agent had 4 houses for sale on the books, now its ~70.
    she’s decided to pull it off the market and rent it out.

  6. Jumping jack flash

    Slow melt scenario revived!
    Banks stop lending
    RBA holds rates until debt is repaid
    30 years later interest rates rise.

    Now, it is likely that some external force may force them to raise before then, but while the US and China keep sparring then it all looks good. Can it keep going for 30 years?

    Its a long time. Incredibly risky. Yet risk still seems to be completely ignored to favor the banks.

    Meanwhile everything remains the same: cost of living gouged as much as possible, ie, completely and unashemedly, wages stolen (ie stagnant wages for the plebs – aka “trickle up”), immigration high to facilitate wage theft.

  7. I don’t even bother to read the release any more, I just assume futureboom is imminently imminent.