Australian interest rates

Chris Joye on Aussie QE: Because most of our borrowers pay “variable” as opposed to “fixed” rates of interest, the cost of borrowing in Australia prices off short-term (variable) rather than long-term (fixed) interest rate benchmarks.

Via the SoMP: Domestic growth has been revised lower for 2019 Over 2018, Australian GDP growth was weaker than previously anticipated (Table 5.1).

Excerpted from Brett Gillespie at Ellerston Capital: For my regular readers, this month’s note is a little different. Briefer with one myopic focus. This month I am going to focus on Australia, and specifically the Reserve Bank of Australia (RBA).

Yes, this is what monetary policy has come to, via George Theranou at UBS: The RBA seems to be shifting from inflation targeting towards the labour market as the key policy driver.

Via AFR: Former Reserve Bank of New Zealand governor and architect of its inflation target band Don Brash has cautiously come out in favour of Australia reviewing its inflation target due to persistently lower levels of inflation.

Weeoo, weeoo, weeoo.

It started so innocently with a little piece from Patrick Commins: The RBA still has the potential to cut rates further, but by this stage that just looks like a case of indulging in “the hair of the dog that bit you”.

Let’s invite a reverse takeover of the RBA by the RBNZ which just cut its cash rate to 1.5bps: The Official Cash Rate (OCR) has been reduced to 1.5 percent.

Bravo Professor Ross Garnaut, published with permission from author: Productivity growth has been dismally low in the 21st century.

If you can be bothered, there’s oodles of amateurish commentary around on the RBA today.

From the RBA just now: At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

If you think it matters to the RBA at this late juncture, retail sales were OK but in March at 0.3% but volumes were not for the first quarter: MARCH KEY POINTS CURRENT PRICES  The trend estimate rose 0.3% in March 2019.

It’s almost turned dovish: Shadow Board Sees Downside Risks to Australian Economy Increasing but Interest Rates Should Remain Steady Significantly, Australia’s inflation rate has fallen to 1.3% in the March quarter, putting it well below the Reserve Bank of Australia’s official target band of 2-3% and thus confirming economists’ concerns of a weakening economy.

As markets adjust to new trade deal risk, Aussie bond yields have gapped to new all-time lows this morning: The short end has now fully priced one rate cut.

The conduit through which the RBA has traditionally passed its corrupt leaks about monetary policy movements opened on the weekend, via Terry Mccrann: It is the first time in the more than two-and-a-half years that Philip Lowe has been governor that there is even actually the possibility of an official rate change from the RBA.

Via the AFR today comes Chris Joye: It would be incredibly dumb to unnecessarily cut the cash rate – and possibly influence the election result – when this will get capitalised straight back into house prices and stop a desperately-needed correction in Australia’s overvalued bricks and mortar.

Here’s the chart that has destroyed the credibility of the Reserve Bank of Australia: And here is the very obvious reason why it failed so horribly: The bank focused on unemployment when it should have been watching underemployment.

Via the AFR comes National Australia Bank chief executive Philip Chronican: …who has dismissed calls for an interest rate cut when the Reserve Bank of Australia meets next Tuesday, saying it was unnecessary and would do little to stimulate the economy.

Via some very temporary factors, via Banking Day: Australia’s largest direct provider of lender’s mortgage insurance, Genworth, has recorded a sharp turnaround in first quarter profit after crystalizing monster gains on its investment portfolio.

Via Terry Mccrann: A rate cut at next Tuesday’s Reserve Bank meeting is possible but remains most unlikely.