The Reserve Bank will sit on its key cash rate today, leaving it at 2.0% because there are no reasons for a cut.
All 14 economists surveyed by AAP expect the central bank to keep the cash rate at 2% at its October meeting, and only three are predicting that there will be another interest rate cut.
That’s even though there are distinct signs of a further slowing in global economic activity – especially in our key markets in Asia, and particularly China where activity remains very sluggish.
The South Korean and Taiwanese economies remain weak, be-devilled by falling exports, as does Japan which appears tio be heading for yet another shallow recession.
At home, not enough has changed since RBA Governor Stevens appearance before a key federal parliamentary economics committee when he indicated that he was “pretty content” with current monetary policy settings.
The only significant change was the failure of the US Federal Reserve to lift interest rates at its September meeting.
But watch the post-meeting statement to see if the RBA has become more concerned about the risks to global growth from the emerging world.
The minutes of the September meeting were dominated by a discussion of what was happening in the Chinese economy.
Like so many other major economies (but not the US), Australian economic growth is running well below potential, spare capacity in the economy is helping keep wage growth lower than inflation, employment is growing – but only very slowly. And despite the lower $A, inflation will remain low, and pressure the RBA into cutting rates further.
This could come as early as November, when the RBA will review its economic forecasts or early next year, and after the September quarter’s consumer price inflation data is released.
And the most up to date economic data for the bank to consider showed a small rise in inflation according to the monthly measure from TD Securities – an annual rate of 1.9% in the 12 months to December and a monthly rate of 0.3%.
But the most outstanding figures were the monthly job ads series from the ANZ which showed a 3.9% jump in September from August, which they rose 1.3%. And in the year to September, job ads rose a seasonally adjusted 12.8%.
That goes nicely with last week’s three year high for job vacancies reported by the Bureau of Statistics. The September employment data is out next week from the ABS.
