The RBA's 'glass half full' outlook: ANZ's Felicity Emmett

The RBA's 'glass half full' outlook: ANZ's Felicity Emmett
The RBA's 'glass half full' outlook: ANZ's Felicity Emmett


The minutes of the RBA August board meeting revealed a marginally more positive tone to the commentary. Given that the Board meeting pre-dates the release of the comprehensive Statement on Monetary Policy (SoMP), they don’t provide significantly new detail, but the tone suggests that interest rates are firmly on hold.

Does this mean the Bank has moved to ‘neutral’? We don’t really think so. While the RBA is certainly wishing and hoping that it won’t have to cut rates again, over the next 18 months there is still a greater risk of a further cut in the cash rate than a hike.

The points of interest in the minutes were:

The Board noted that downside risks to the outlook for China growth have receded. The improvement in housing markets and stimulatory policy steps taken were noted. Keep in mind though that the meeting pre-dates the release of the patch of very weak data last week (especially for exports) as well as the devaluation of the RMB.

On the domestic economy, the minutes had a decidedly ‘glass half full’ feel about them, despite the fact that the forecasts presented to the board included a downgrade for GDP forecasts. They noted the improvement in labour market outcomes, and were relatively positive about consumption noting that “the most recent data on retail sales and liaison information were consistent with the momentum in consumption growth being sustained”.

The minutes also noted the improvement in business conditions, but highlighted the fact that the pick-up was concentrated in household and business services, which are generally less capital intensive than goods-related sectors.

On the currency, the minutes reiterated the points made by Governor Glenn Stevens in a recent speech and the SoMP, that the lower exchange rate was supporting net services exports

Board members discussed APRA’s measures targeting investor housing lending, but noted that it was too early to gauge the impact
Felicity Emmett co-head of Australian economics, ANZ Research and can be contacted here.
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