Another record will be set later today when the Reserve Bank holds interest rates at their current level for the 36th month in a row.
The central bank has repeatedly, especially Governor Phil Lowe, made it clear it is not of a mind to lift rates, despite entreaties from a small privileged section of the market and business media for such a move.
Last week’s rate rise from the US Fed saw the same bunch of urgers make the same point again by pointing to the widening gap between the cash rate of 1.50% and the Fed’s rate of 2.% to 2.25% – and the almost certain rate of 2.25% to 2.50% by the end of 2018.
The AMP’s chief economist, Dr Shane Oliver points out that while recent economic growth and jobs data has been good, “we are still waiting for inflation and wages growth to pick up and the slide in home prices risks accelerating as banks tighten lending standards which in turn threatens consumer spending and wider economic growth.”
“As a result, it would be dangerous to raise rates and we don’t see the RBA hiking until 2020 at the earliest and still can’t rule out the next move being a cut,” he wrote at the weekend.
With a holiday on Monday in NSW and the ACT, economic data starts flowing on Tuesday with the CoreLogic data house price data for September to be issued and expected to show another fall in home prices. There’s August building approvals (on Wednesday), the trade surplus (on Thursday) and retail sales (on Friday). Industry car sales figures for September are due out towards the end of the week.
That should all give us a good idea of how household spending is traveling in the third quarter.
This board meeting will also consider and discuss the second and final Financial Stability Review of the year from the RBA. It will be released this Friday week, October 12. What will be interesting to watch for is if there is any commentary on the Hayne royal commission and its interim report.
