A big week for the Australian and New Zealand economies with their central banks due to hand down monetary policy decisions – but don’t expect any moves.
The Reserve Bank of Australia board meeting tomorrow will leave its key interest rate at 1.50% on hold for a record 24 months (two years) ahead of releasing the third Statement of Monetary Policy for the year on Friday.
Across the Tasman the Reserve Bank of New Zealand releases its monetary policy decision on Thursday and is also tipped to leave its official cash rate at 1.75%.
The AMP’s Chief Economist, Dr Shane Oliver says “The RBA’s own forecasts for decent growth and a gradual rise in inflation along with strong infrastructure investment, rising business investment and strong export volumes argue against a rate cut but the peak in the housing construction cycle, uncertainty about the outlook for consumer spending, the weakening Sydney and Melbourne property markets, low inflation and wages growth and tight bank lending standards all argue against a rate hike.
"So the stand-off continues and the RBA will remain on hold. The next move is still likely to be up but not until 2020 at the earliest and there is a rising risk that the next move will actually be down,” Dr Oliver wrote at the weekend.
There’s a speech from RBA Governor Lowe on Wednesday (its about migration and population) and the Statement on Monetary Policy on Friday will confirm that the RBA is on hold for now. The Statement is not expected to contain any major changes to the RBA’s forecasts.
But watch for a defence of the RBA policy statement in the statement against urgings from some economists and the Financial Review for a rate rise.
On the data front, housing finance for June (out Wednesday) is expected to show ongoing weakness in lending.
The Australian June half and full year earnings season accelerates this week with 15 major companies reporting.
The most important will be the Commonwealth Bank on Wednesday (see separate story).
The RBNZ will make similar arguments to those from the RBA when it releases its decision around 7am Thursday.
Low inflation, low wage growth, high household debt and weak consumer spending.
In the US Consumer Price Inflation is out on Friday and no change is expected with the annual rate staying around 2.3%.Data for job openings, small business confidence and producer price inflation will also be released.
And the US earnings season continues with major media companies to dominate the week.
In Japan June quarter GDP data is out on Friday and is expected to show a return to positive growth of around 0.3% quarter on quarter after March quarter’s contraction.
And China’s trade and inflation data for July will be issued this week – Dr Oliver says Chinese July trade data on Wednesday is expected to show import and export growth of around 10% year on year with consumer price inflation (out Thursday) remaining around 1.9% year on year and producer price inflation slowing to an annual rate of 4.4%.
