No rate rise from the Reserve Bank yesterday and no sign of when they might move.
A sort of steady as she goes statement from the Governor Glenn Stevens after the board meeting.
The impact of the Queensland and Victorian floods, plus Cyclone Yasi seems not to be as big a fear as it was a month ago.
Mr Stevens said, "The effects of the natural disasters over the summer have reduced output, but production levels should recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way."
"Production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year.
"Overall, looking through these temporary effects, the Bank expects that inflation over the year ahead will continue to be consistent with the 2–3 per cent target.
"At today’s meeting, the Board judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook."
So no move likely until the May meeting at the earliest, which will have the CPI for the March quarter to assess (and not April).
The central concern remains the still, strong growth in our terms of trade and their impact on inflation, the competition for domestic resources, such as bricks, steel, concrete etc and especially employment and wages.
The RBA’s Commodity Price Index for February, published yesterday (see graph below) confirmed that once again, as did the business investment plans for 2012, with the record first estimate of $132 billion forecast.
And the Governor said this in his statement yesterday:
"Australia’s terms of trade are at their highest level since the early 1950s and national income is growing strongly.
"Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices.
"In the household sector thus far, in contrast, there continues to be caution in spending and borrowing, and a higher rate of saving out of current income.
"The labour market firmed in 2010, with unusually strong growth in employment and a decline in the rate of unemployment.
"Most leading indicators suggest further growth in employment, though most likely at a slower pace.
"Reports of skills shortages remain confined, at this point, to the resources and related sectors.
"After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.
"Inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008.
"These moderate outcomes are being assisted by the high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices," Mr Stevens said.
Commodity export income is expected to hit $220 billion in the year to June 30 this year, up 29%, with a further 14% jump now forecast for 2012 (to $251 billion).
Those sorts of forecasts concern the RBA as they wonder if the economy and the labour market in particular, can handle the boom.
Retail sales are not as weak as they were late last year, the labour market in January was a bit mixed though, but manufacturing has moved into expansion after seven months of contraction.
The 4th quarter GDP data to be released later today will probably be a bit better than forecast a month ago, with economists upgrading their forecasts yesterday from around 0.6% to as high as 1.1% (Westpac).
The consensus now seems to be growth of around 0.8% for the quarter and more than 3% for the year as a whole.
The Reserve Bank’s Commodity Price Index for February has shown another big rise.
The RBA said the index rose 1.9% in Australian dollar terms last month.
"Preliminary estimates for February indicate that the index rose by 2.2 per cent (on a monthly average basis) in SDR terms Special Drawing Rights, after rising by 5.3 per cent in January (revised).
(Special Drawing Rights are a sort of international currency for Governments and central banks)
"The largest contributors to the rise in February were increases in the estimated prices of iron ore and coal, reflecting some further adjustment towards the higher contract prices in the March quarter.
"Increases in the prices of crude oil and wheat also contributed to the rise, while beef & veal prices fell."
The bank said that in the past year the index has risen 48% in SDR terms.
"Much of this rise has been due to increases in iron ore, coking coal and thermal coal export prices.
"With the appreciation of the exchange rate over the year, the index rose by 32 per cent in Australian dollar terms."
That is still a substantial increase.
