Goldman is hosing the interest rate hawks today.
There were no major surprises in the Minutes of June’s meeting, with the forward guidance consistent with Governor Bullock’s post-meeting press conference (‘not ruling anything in or out’).
In terms of incrementally dovish language, the Minutes noted wages growth had likely “passed its peak” on three occasions and highlighted that risks to the labour market “were seen to be to the downside.” That said, on the hawkish side, the Minutes flagged the recent upward revisions to consumption and upside risks to inflation.
Overall, the bar to renewed rates in Australia hikes still looks fairly high to us. While the Minutes pre-date last week’s stronger-than-expected monthly CPI data, in our view the Board is likely to remain on hold so long as aggregate demand remains soft and labour market conditions continue to ease.
What is more concerning is that the slowed progress on inflation is meeting intensifying job market weakness and fast slowing wages, a recipe for the continuation of Jim Chalmers’ household real income smash. Goldman again:
The forward guidance was broadly unchanged, reiterating that it was “difficult either to rule in or rule out future changes in the cash rate target.” That said, the Minutes added there was “some elevated upside risk” around the inflation forecast and removed the prior language that noted it was “reasonable to look through short-term variation in inflation to avoid excessive fine-tuning.”
On wages growth, the Minutes noted “wages growth had likely passed its peak for the current cycle” and that “the Fair Work Commission’s decision on award wages, which had been largely in line with expectations, would see award-linked wages growth step down this year.”
The worst Treasurer in modern history is not about to turn your fortunes around:
