July 2015 RBA minutes – still dovish: ANZ

The Minutes from the RBA’s July board meeting contained little new indication on the evolution of monetary policy, although they suggest that the Bank continues to holds a mild easing bias.

• On the labour market, the Board noted the recent improvement in the data. They did, however, note that softer population growth had helped to keep a lid on the unemployment rate despite below-average growth in GDP, with workers leaving the mining states of Queensland and Western Australia where growth is weakest. They also noted the mixed outlook for labour demand indicated by the various forward indicators. These comments suggest to us that while the Bank would clearly be pleased if the peak in the unemployment rate does not prove to be as high as previously thought, it seems unlikely to change its view that the unemployment rate is likely to stay elevated for some time.
• On growth, the Minutes noted that the strength in Q1 (when GDP rose a solid 0.9% q/q) had not carried through to Q2. The monthly trade data suggest resources exports declined in the quarter (our preliminary calculations point to a small net exports subtraction) while non-mining business investment remains subdued. They did, however, point out the improvement in recent months in business conditions (note that conditions have improved further since this meeting).

The comments on the currency were broadly unchanged with members noting that “further depreciation seemed both likely and necessary”.

Of more interest will be Governor Glenn Stevens’ speech tomorrow which is on the topic of ‘Issues in economic policy’. Given his recent rhetoric, we think he is likely to reiterate or expand on issues on monetary policy transmission and the government’s role in infrastructure spending.

The full text of the Minutes can be found here. 

Felicity Emmett is co-head of Australian economics, ANZ Research and can be contacted here.