The Reserve Bank’s July meeting later today won’t change interest rates or the bank’s sit and wait stance, despite some silly commentary yesterday by media business economists warning that interest rates could rise – sooner than later, or that the central bank could join the Fed and Bank of England in getting all hairy chested about controlling inflation.
It won’t. Inflation is not a concern anywhere (except the UK as the impact of Brexit on the pound and slowing business and consumer activity is dragging the economy towards a rerun of 70’s style stagflation.
The truth is that like much of Europe, the US, Japan and China, Australia is enjoying solid growth (ignore the 0.3% rise in first quarter GDP). Wages in all areas remain weak and that is helping keep inflation under control.
Jobs growth is better than expected (especially here) but consumer demand is softer than it should be.
The June job ads report from the ANZ yesterday showed a solid end to the financial year. Seasonally adjusted job ads rose 2.7% in June from May, while in trend terms they were up 1.0%. The ANZ said the trend growth rate over the six months to June was 0.6% a month, double the 0.3% rate for the first six months of 2016.
Seasonally adjusted, job ads have risen 4.9% since the start of 2017, with annual growth jumping from 7.4% in May to 10.5% in June.
Data out yesterday showed the AIG survey of manufacturing revealed a 0.2 points rise to 55.0 in June – a ninth consecutive month of expansion for sector.
And the first results of the new The Commonwealth Bank’s/Markit Purchasing Managers Indexes, showed uniform growth across manufacturing and services, echoing the buoyancy showing up in successive surveys of business conditions and confidence from the monthly National Australia Bank reports.
In fact the NAB’s monthly surveys have been sending a message most business economists and journalists have ignored.
Building approvals fell in may thanks to another volatile month for apartments and home units which saw a big slide.
The Australian Bureau of Statistics said that seasonally adjusted building approvals fell for a ninth consecutive month in May. Approvals fell 19.7% year on year in May, against a 17.2% fall in April.
Month-on-month terms, building approvals fell 5.6% in May, driven by a fall in total dwellings excluding private dwellings.
Approvals had risen by 4.4% (revised from 4.8 per cent) in April because of a jump in non private dwelling approvals.
In trend terms the ABS said number of dwellings approved fell 1.9% in May 2017 and have now fallen for three months in a row.
"Dwelling approvals continue to weaken in trend terms, falling by around 700 dwellings over the past three months," said Daniel Rossi, Director of Construction Statistics at the ABS. "The May 2017 data showed that the number of dwellings approved is now 18 per cent below the peak in May 2016".
And figures yesterday showed a small rise in house prices in June, according to CoreLogic, up 08% in June compared with the 1.1% slide in May.
Annual growth in prices accelerated to 9.6% in June, from 8.3% in April. But that was still lower than the 12.9% year on year surge in March.
The increase for the whole June quarter was also a modest 0.8%, the smallest since late 2015, with Sydney recording a notable slowdown.
