It missed the domestic bust that is underway, the external bust that is underway, the global downturn and the structural change in monetary policy towards macroprudential tools yet it is unwavering in its demand for more deflation and lot’s of it:
Conviction that Rates Need to Stay Steady Strengthens: Shadow Board
Australia’s inflation rate, at 1.6% (June quarter), remains well below the Reserve Bank of Australia’s official target range of 2-3%. The unemployment rate equals 5.2% for the fourth month in a row, and real wage growth remains low at 0.7%. The RBA Shadow Board’s conviction that the cash rate should remain at the new, low rate of 1% equals 71%, while the confidence in a required rate hike equals 14% and in a required rate cut equals 14%.
Based on latest ABS figures, the seasonally adjusted unemployment rate in Australia remained steady at 5.2% (July) for the fourth month in a row. The labour force participation rate ticked up to 66.1%. Encouragingly, total employment rose by more than 40,000, more than 89% of which was full-time. Nominal wage growth (year-on-year) exactly matched expectations of 2.3% for the second quarter, implying an unchanged real wage growth rate of 0.7%. As argued in previous shadow board comments, this rate of wages growth is too small to engender a significant increase in household consumption expenditure and thus remains a concern.
