Steady as she goes from the Reserve Bank yesterday with yet another month of unchanged interest rates.
In a familiar refrain, the central bank said there was nothing in the economy that would cause it to change rates, let alone increase them.
The key concerns remain low wages growth and indebted households.
“One continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low and debt levels are high. The drought has led to difficult conditions in parts of the farm sector,” Governor Phillip Lowe said in his post-meeting statement.
And “A further gradual decline in the unemployment rate is expected over the next couple of years to around 5 percent. Wages growth remains low, although it has picked up a little.
“The improvement in the economy should see some further lift in wages growth over time, although this is likely to be a gradual process.”
The last time the RBA moved the cash rate was August 2016 — a 25 point cut to its current 1.50% level.
The language in the statement was mostly unchanged, but the tone was more positive about the performance of the economy.
“The latest national accounts confirmed that the Australian economy grew strongly over the past year, with GDP increasing by 3.4 percent.
“The Bank’s central forecast remains for growth to average a bit above 3 percent in 2018 and 2019.
“Business conditions are positive and non-mining business investment is expected to increase. Higher levels of public infrastructure investment are also supporting the economy, as is growth in resource exports,” Dr. Lowe said.
But despite this, the bank decided to sit on rates, or as Dr. Lowe explained in a now familiar phrasing “Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”
The AMP’s Chief Economist, Dr. Shane Oliver said in a comment yesterday afternoon: “There remains nothing in the RBA’s latest post meeting Statement suggesting an imminent change in monetary policy.
“Our view remains that the RBA will keep rates on hold out to 2020 at least and the next move in rates could still turn out to be a rate cut given the risks around house prices and consumer spending, albeit this would not occur for at least another six months.”
