The statement today sounded a little more upbeat than before on domestic economic conditions, reflecting the recent flow of decent data. In particular, officials mentioned that the outlook for business investment had improved – before, only “some pickup” was expected, which sounded a little more equivocal. The discussion on the global outlook, though, sounded familiar, with above-trend growth in advanced economies still expected. China’s high level of debt remained the key medium term global risk.
Officials still expect a gradual pickup in economic growth in Australia although, as before, high household debt and weak real wages growth will be constraints on consumer spending. On housing, prices continue to rise “briskly” although, for the first time, the RBA singled out Sydney’s market for signs that conditions had eased. The labour market comments today were little changed from the statement released back in early August – RBA officials still expect “solid” jobs growth over the period ahead.
On AUD, which has hovered just below 80 US cents since the last RBA Board meeting a month ago, today’s statement highlighted that recent strength is partly owing to lower USD. Officials also mentioned, though, that the recent appreciation of the AUD probably will result in a slower pickup in activity and inflation, relative to previous forecasts. The RBA still expects inflation to “pick up gradually as the economy strengthens”.
As before, today’s statement contained no explicit guidance on the policy rate, but it still seems likely that the next move from the RBA will be a hike. Key housing markets remain hot, wages growth and inflation are poised to lift, albeit slowly, the jobless rate is falling, and the global outlook is firming, which helps to explain the rise in commodity prices. Also, Bank officials probably are keen to dissuade already stretched households from taking on even more debt.