RBA BOARD MEETING MINUTES - JUNE 2013 In summary: 1. The RBA maintains a somewhat more muted easing bias, saying low inflation “might” provide scope to cut the cash rate if “required to support demand”. 2. The AUD’s decline was still not in line with the fall in export prices. Further AUD falls are possible (and desirable). 3. Economists predict a further cut in the cash rate cut to 2.50% in August, after the June quarter CPI data. In detail: The RBA is still entertaining the possibility of another cash rate cut if demand conditions warrant some more stimulus. But this bias is somewhat more muted with the RBA noting that the inflation outlook “might” allow scope for such a move. The central bank appears to be comfortable with the international outlook. They note that growth in Australia’s major trading partners is broadly in line with their forecasts. China’s economy is growing at a “steady pace”, the US economy is on a path of “moderate growth” and the euro area remains in recession. Prior interest rate cuts (over 2011 and 2012) were aimed at supporting the Australian economy through the Euro area crisis and the contagion that eventuated. Given the stabilisation in the international outlook, recent interest rate cuts have been aimed at supporting the domestic economy through the transition to non‑mining led growth. Domestic economic conditions have been mixed over recent months. At the time of the Board meeting, the day before the QI GDP release, growth was described as being a bit below trend. The subsequent QI GDP data indicated, that GDP growth of 2.5%pa, is well below trend. Business investment in QI fell with declines in mining and non‑mining parts of the economy. The RBA notes that mining investment appears to be near its peak but could remain at relatively high levels for the coming year. Business surveys continue to indicate the generally subdued nature of activity across all business sectors. Retail spending by households was relatively strong over the first few months of the year, with volumes rising as price discounting became more prevalent. The perceived risk was that the decline in consumer confidence over May (since reversed) could moderate spending. Low interest rates are lifting activity in housing lending and residential construction. So far, the upward move in dwelling prices has been modest. The RBA’s decision to cut rates in May had been followed by lenders lowering their interest rates to households and businesses to levels at or approaching historic lows. Labour market outcomes over the past few months have been volatile. But the RBA expects employment growth to remain modest, judging by the leading indicators. As a result, the wages indicators are showing an easing in growth rates across industries and States. Public sector wages growth has been tempered by ongoing fiscal restraint. Wage restraint is an essential precondition for low inflation, the more so since the AUD is now well below the RBA’s assumptions published in May (AUD/USD at 1.02, TWI at 77). Of some concern, therefore, is that domestic inflation appears to be trending up despite the downward trend in wages growth over the past six years. Further interest rate cuts are expected in coming months to 2.50%, most probably in August, after the June quarter CPI data. The near‑term inflation outlook is benign. There is still likely to be an upwards drift in the unemployment rate There is little local economic information released prior to the July RBA Board meeting. So it is reasonable to expect no change in July.
Posted on: Fri, 21 Jun 2013 04:56:59 +0000
Trending Topics
Recently Viewed Topics
© 2015