No change whatsoever in the Reserve Bank’s stance on interest rates at yesterday’s final board meeting for the year in Perth.
Despite claims to the contrary from some quick-to-write analysts yesterday afternoon, the easing bias they claimed had seen the bank leave the ‘door ajar’ for another rate cut, was nothing but a repeat of a line from the November meeting, and the minutes for that meeting and the final Statement on Monetary Policy for the year, also issued in November.
So we head off into the long summer holiday break with the economy probably doing a bit better than expected, but with significant questions about the 4th quarter performance which won’t be answered until next March.
RBA governor, Glenn Stevens gives us his final views on the economy and 2016 in a speech in Perth this morning and later today we get the 3rd quarter national accounts with estimates for GDP growth of between 0.6% and 0.9% quarter on quarter – and around 2.3% for the 12 months to September.
The 3rd quarter GDP report will be more encouraging than the weak June quarter, but will depend heavily on a 1.5 percentage point contribution from the trade account, which go some way to offsetting the very weak contributions from construction and investment, while government spending won’t be a big positive either. Household spending and property will be a contributor though in the plus column.
In yesterday’s post meeting statement from Governor Stevens he again made the point that the “moderate expansion in the economy continues in the face of a large decline in capital spending in the mining sector”.
"While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year. This has been accompanied by stronger growth in employment and a steady rate of unemployment.
"Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet. Inflation is forecast to be consistent with the target over the next one to two years.
“Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up” That’s what the RBA’s lending data for October confirmed on Monday It also confirmed that lending to property investors was falling fast and was now under the 10% annual growth limit favoured by regulators," Mr Stevens said.
Mr Stevens said the pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities. That was also confirmed by the surprise 1.4% dip in Sydney house prices last month and a larger 3.5% drop in Melbourne as clearance rates at auctions slumped and demand for high priced suburbs faded.
The final and key paragraph in Mr Stevens statement was unchanged from last month and reads, "At today’s meeting the Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand. The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.”
