Strong consumer confidence figures, rising imports and confirmation of a solid end to 2009 for the motor industry (retailers, at least) have added to the belief that we will get another rise from the first Reserve Bank board first meeting of the year on February 2.
The results of the latest Westpac/Melbourne Institute consumer confidence surveys (see story below) were better than expected, while the Australian Bureau of Statistics figures on December car sales confirmed industry figures that car sales finished the year with a tax-driven flourish.
Now the fear is that sales will slump due to demand being dragged forward, but that is a small quibble as the economy continues to rebound strongly.
Corporate profits are in good shape, based on the early flow of December 31 trading updates.
The Commonwealth Bank and fund manager AXA, produced very solid improvements, as did several other groups.
Therefore, it’s no wonder there’s a widespread unanimity among forecasters for a 4th successive rate rise from the RBA.
So it’s interesting that the central bank is making sure the markets and everyone else will have no doubt of just what the bank is thinking for the rest of the year.
There’re half a dozen occasions next month when the bank and its senior managers will be in the public eye with scheduled reports and appearances, or speaking engagements where they will be open to questions from the media and the respective audiences, including Federal parliamentarians.
After no major statements for January, the bank kicks off proceedings with the post-meeting statement on February 2 from Governor Glenn Stevens.
After the sharp rise in November retail sales and the surprisingly strong December jobs figures (plus solid readings on housing), the bank is now widely expected to lift rates at this meeting with the markets punting on an 0.25% increase to 4%.
That’s the view of the AMP’s chief economist, Dr Shane Oliver who wrote on Friday, "The December employment figures coming on the back of strong data for retail sales, car sales and building approvals suggest that it is highly likely that the RBA will raise interest rates by another 0.25% next month, which will take the cash rate to 4%."
Others say an 0.50% increase is possible, but that will depend heavily on the state of inflation, with producer price and consumer price indexes out a week this Wednesday.
Most forecasts say price pressures will be benign, but there are still concerns the sharp rise in government changes and fees in the September quarter, will again show up in the December quarter figures, out January 27.
Three days after the rate decision, the RBA releases its first quarterly Statement on Monetary Policy for 2010.
That will contain updated growth and inflation forecasts for this year and 2011.
This will also elaborate on the reasoning behind the rate decision from the board the previous Tuesday.
On February 16 the minutes of the February 2 meeting will be released, and we will then have a complete a view of the RBA’s outlook for the coming year.
And, February 16 will see the RBA’s Assistant Governor (Markets), Guy Debelle, speak at a lunch in Sydney. He speaks 30 minutes or so after the minutes are released at 11.30 am.
Two days later, Philip Lowe, Assistant Governor (Economic), speaks at the CEDA Economic and Political Overview 2010 conference in Sydney.
The day after Governor, Glenn Stevens makes his first appearance for the year before the House of Reps Economics Committee in Canberra.
The following week, on February 23, Deputy Governor, Glenn Ric Battelino is due to make a speech to the Sydney Institute.
The upshot of this is that by the end of February, no one should be in any doubt of the thinking from the RBA on the state of the economy and its expected progress through 2010.
But don’t expect the central bank to be as definite on the future course of interest rates as it was for much of 2009. The economy is now recovering rapidly and the bank is now back on a ‘normal’ policy approach of being ‘delphic’ in its statements.
In its last public statement foe 2009, the bank concluded the minutes for the December meeting (which lifted rates 0.25 to 3.75%) by saying.
"The question for members was whether it was more appropriate to take a further step at this meeting or to hold the cash rate steady pending a further evaluation of developments at the February meeting. Members canvassed the arguments for each course of action.
"They weighed the potential for adverse effects on confidence of a further adjustment at this time, the continuing uncertainty over the international outlook given conditions in the major economies, and the high level of the exchange rate.
"Members also considered the likely long-run pressures on the economy from the combined demand for housing and infrastructure and resources sector investment over the years ahead.
"They were mindful that the approach of lowering interest rates very quickly in response to the threat of serious economic weakness needed to be accompanied by a timely removal of at least some of that stimulus once the threat had passed, if interest rates were not to end up being too low for an extended period.
"Members saw the arguments as finely balanced, but concluded that the stance of monetary policy would best reflect the circumstances facing the economy over the period ahead if there were an increase in the cash rate of 2
