RBA holds rates

Just in from the RBA:

At its meeting today, the Board decided to leave the cash rate unchanged at 1.00 per cent.

The outlook for the global economy remains reasonable. However, the increased uncertainty generated by the trade and technology disputes is affecting investment and means that the risks to the global economy remain tilted to the downside. In most advanced economies, unemployment rates are low and wages growth has picked up, although inflation remains low. The slowdown in global trade has contributed to slower growth in Asia. In China, the authorities have taken steps to support the economy, while continuing to address risks in the financial system.

Global financial conditions remain accommodative. The persistent downside risks to the global economy combined with subdued inflation have led a number of central banks to reduce interest rates this year and further monetary easing is widely expected. Long-term government bond yields have declined further and are at record lows in many countries, including Australia. Borrowing rates for both businesses and households are also at historically low levels. The Australian dollar is at its lowest level of recent times.

Economic growth in Australia over the first half of this year has been lower than earlier expected, with household consumption weighed down by a protracted period of low income growth and declining housing prices. Looking forward, growth in Australia is expected to strengthen gradually from here. The central scenario is for the Australian economy to grow by around 2½ per cent over 2019 and 2¾ per cent over 2020. The outlook is being supported by the low level of interest rates, recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some housing markets and a brighter outlook for the resources sector. The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income and a stabilisation of the housing market are expected to support spending.

Employment has grown strongly over recent years and labour force participation is at a record high. There has, however, been little inroad into the spare capacity in the labour market recently, with the unemployment rate having risen slightly to 5.2 per cent. The unemployment rate is expected to decline over the next couple of years to around 5 per cent. Wages growth remains subdued and there is little upward pressure at present, with strong labour demand being met by more supply. Caps on wages growth are also affecting public-sector pay outcomes across the country. A further gradual lift in wages growth would be a welcome development. Taken together, recent labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.

The recent inflation data were broadly as expected and confirmed that inflation pressures remain subdued across much of the economy. Over the year to the June quarter, inflation was 1.6 per cent in both headline and underlying terms. The central scenario remains for inflation to increase gradually, but it is likely to take longer than earlier expected for inflation to return to 2 per cent. In both headline and underlying terms, inflation is expected to be a little under 2 per cent over 2020 and a little above 2 per cent over 2021.

Conditions in most housing markets remain soft, although there are some signs of a turnaround, especially in Sydney and Melbourne. Growth in housing credit remains low. Demand for credit by investors continues to be subdued and credit conditions, especially for small and medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality.

It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target. The Board will continue to monitor developments in the labour market closely and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.

These statements are particularly funny and show that the RBA doesn’t have a clue:

“Looking forward, growth in Australia is expected to strengthen gradually from here. The central scenario is for the Australian economy to grow by around 2½ per cent over 2019 and 2¾ per cent over 2020″…

“The unemployment rate is expected to decline over the next couple of years to around 5 per cent.”  

With the construction bust gathering speed and forward indicators of employment worsening, expect 2020 to be a shocker for the Australian economy.

The next move in interest rates remains down.

Comments

  1. Well, that’s a dumb non-committal thing for them to do. Do they want a freaking bubble, or not?

    • Well Peachy, they are lunatics after all.

      Only lunatics would exercise some self control at this point.

      If they were really sane bubble loving central bankers they would be cut, cut, cutting and making sure asset prices fly past the buttery fingers of APRA in slips.

      With all the tension in the world and the crazy CCP thinking they own Hong Kong only a solidly inflating wall of existing house prices can keep us safe in our beds.

      I hope Josh gets out there this afternoon to express some disappointment and demand, nonetheless, that the banks pass on all of the cut that a sane RBA should have made.

      🙂

    • The Horrible Scott Morrison MP

      Yes, but the trick is to draw it out so that it lasts precisely only until the next Labour election victory. Don’t you know anything about bubble management?

    • It’s a MasterCard ad

      That special moment you realise the RBA’s clueless – PRICELESS

      • proofreadersMEMBER

        But the RBA has by definition, had so many of those special moments from time immemorial?

  2. Keep going low, Lowe… The bond market is telling you where you’re headed not your stupid forecasts!

    • I know I shouldn’t judge people by their appearance, but everytime I see this guy I think “He looks utterly clueless and out of his depth”

      • In fairness what do you want him to do? Lower the rates? Or move them up?

        The recent jitters may disappear in a day or 2, or they could drag on for another month. Nobody really knows. If he cuts now and the markets right themselves, then he’s used a bullet for nothing. Not that these bullets are doing anything anymore anyway..

        Rock and hard place, can’t raise. You’ll crash the housing market. Can’t lower you’ll crash the dollar further. 😀

      • It’s no surprise he looks like a cornered rat Gav, because he is. He’s got nowhere to go.

        You ask what do I want him to do? Go back in time to May 2003 and fix it before it got out of control.

        Sadly I’m fresh out of De Loriens and there is no going back to the future. The RBA has done too little too late and we all know it.

      • haha, yeah can’t disagree with that. I guess it was all a bit rhetorical. Honestly central banks should raise rates to a normal 5% odd. Regardless of inflation. Forget inflation targeting and give money some kind of purpose. Let people save if they want, stop the debt binge, we all have too much crap in our lives we don’t need and doesn’t make us happier. Sure a few things will break, some jobs will be lost, but maybe wealth inequality will reduce and we will all be a bit happier and less neurotic or maybe like John Lennon, I’m just a dreamer lol.

  3. SnappedUpSavvyMEMBER

    ” Wages growth remains subdued and there is little upward pressure at present, with strong labour demand being met by more supply. ”

    treasonous mongrels

    • Waves of more supply third world invaders continue to flood through our airports to destroy our society every day. The RBA are indeed traitors, and deserve the traitors fate.

      Oh dear. I think my views on this are getting stronger by the day. I wonder why that is?

  4. The outlook for the global economy remains reasonable.

    A normal person looking at that statement, looking at the recent moves on the S&P, looking at the ASX down 400 points in the last few days, looking at US tariffs, looking at the Yuan retaliation, looking at Hong Kong, looking at the global economy….

    A normal person looking at that statement would think that the RBA are, as psychologists like to say, “not right in the head”.

    • SoMPLSBoyMEMBER

      Lol ” Not right in the head”.
      Spot on!
      Reminds me of sales job I had once and sales were all that mattered. Yet, the guy with the least amount of sales (zero) had the the most magnificent pipeline of glory that was imminent.
      Of course they never happened and he was wished good luck on his future endeavors as he carried the box of his office essentials, Teamwork poster and green plant to his car.

    • Yep, it’s a pretty interesting comment to make at this point in time. Are these guys so far detached from reality as it seems?

  5. Jumping jack flash

    He starts off strong, blaming China and the US for all the problems.

    “The persistent downside risks to the global economy combined with subdued inflation have led a number of central banks to reduce interest rates this year and further monetary easing is widely expected.”

    Yes, yes, we know. We were there. We all know that those last cuts had nothing to do with jobs, wages or inflation and everything to do with the fact that the others did it so we had to. The cuts were made. Inflation and wages are still stagnant and will continue to be stagnant for many, many decades.

    “Taken together, recent labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.”

    Whew! Lucky for that! But it will probably need more cash rate cuts to happen, I guess.

    “It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target.”

    So easy!
    Just cut them now, mate, and bring the recovery faster. You’re torturing us, mate. Y u do dis?

    • TailorTrashMEMBER

      “Taken together, recent labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment.”

      Can somebody with English as a first language and a modicum of economic understanding translate this for me into WTF does it mean

      • The Traveling Wilbur

        The beatings in wage negotiations will continue until inflation improves basically.

        Or less cryptically: Employees can expect to see thier standard of living deteriorate and the economy will carry on. Happily.

      • TailorTrashMEMBER

        Thank TTW ….yes looks like we can
        have a nice ticking economy Bangladesh style
        in the not too far future …

    • +100, with a hefty dose of “keep it sounding calm, don’t panic the horses” thrown in.

  6. Well (feeling slightly foolish)…I would have done just what Uncle Phil and friends did. Seems about right given the known knowns. Most opinions above are speculative based on known unknowns, seems to me

      • So all the rats can sell all their IPs and bank shares before the housing crash wipes the slate dirty brown

  7. A terrific set of numbers for Melbourne

    https://www.domain.com.au/news/the-melbourne-suburbs-where-house-prices-have-risen-and-fallen-the-most-862768/

    Median house price falls by suburb
    Suburb Median house price YoY
    St Kilda $758,000 -32.1%
    Toorak $2,812,500 -31.7%
    South Yarra $1,262,500 -31.4%
    Hawthorn $1,636,250 -27.3%
    Hughesdale $990,000 -26.5%
    Carlton $1,005,000 -26.1%
    Box Hill South $974,000 -25.1%
    Box Hill $1,175,000 -21.4%
    St Kilda East $1,027,500 -21.1%
    Hawthorn East $1,661,000 -20.7%

  8. Complex Carbon Unit

    Uncle Phil looks like he just dropped a fart ! Oh that’s right I’m to wealthy my sh1t doesn’t stink so one will smell it !!!

  9. Complex Carbon Unit

    Uncle Phil looks like he just dropped a fart ! Oh that’s right I’m to wealthy my sh1t doesn’t stink so no one will smell it !!!