RBA Leaves Rate Unchanged With Low Rates Supporting Economy

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    The Reserve Bank of Australia (RBA) as expected…



    The day after….Reserve Bank of Australia governor Lowe speaking on’ The Housing Market and the Economy’

    via Reuters

    has flexibility to adjust monetary policy in either direction
    plausible scenarios where rates go up and where rates go down
    at moment, the probabilities appear “reasonably evenly balanced”
    labor market is key issue, recent data have been encouraging
    other economic indicators “paint a softer picture”
    GDP growth in second half of 2018 was clearly less than in first half
    growing tension between strong labor market data and softer GDP data
    adjustment in housing market is manageable for overall economy
    less than 5% of indebted owner-occupier households have negative equity
    liaison showed some lenders became more cautious last year
    credit conditions tightened more than was probably required
    important that banks are prepared to take credit risk
    tightening in credit supply contributed to slowdown in credit growth
    but main story is one of reduced demand for credit, rather than reduced supply.
    wealth effects influencing consumption, but mainly through income expectations
    this means developments in labor market particularly important


    Australian Q4 GDP 0.2% q/q vs. expected & Prior 0.3%)

    This was a miss 0.2% q/q and below the previous which was a “shocker” result
    2.3% y/y expected 2.6% y/y, prior 2.7%, revised from 2.8%

    RBA forecast was 0.6%, not adjusting for previous miss it seems
    The AUD fell from 7088 to 7033 on the release


    National Australia Bank calls for two cuts from the Reserve Bank of Australia this year in 2019

    NAB head economist Alan Oster:[/b]

    We think the RBA will act this year on a ‘no regrets’ basis to boost economic activity and to offset a likely (on our forecasts) increase in unemployment in 2020

    We now think that the RBA will make two rate cuts in 2019. Growth appears to have lost significant momentum, placing at risk further improvement in the tabour market at a time when inflation poses little constraint on policy and financial stability risks have abated. We have pencilled in one 25bp cut to 1.25% in July and a further 25bp cut to 1% in November.


    Another report in that vein …

    Australia Westpac Consumer Confidence for March: -4.8% m/m (prior +4.3%)

    Helmholtz Watson

    [b]Luci Ellis, Assistant Governor (Economic) at the Reserve Bank of Australia
    Speech is titled: ‘What’s Up (and Down) with Households?’

    via Reuters headlines

    watching labour market developments closely
    labour market has unambiguously improved
    can be reasonably confident in the strength of labour market data
    says strength is shown in multiple, independently collected data sets
    says many of our own liaison contacts tell us that they are hiring
    still a little way off unemployment level that would drive materially faster wages
    weak income growth weighing on household consumption
    falling house prices may have impacted spending on vehicles, household goods
    tax revenue from households has grown solidly despite slow income growth
    growth in tax paid has exceeded income growth for past six years
    progress in tax collection have boosted revenue collected from a given income
    says some of the drags on income not likely to be permanent


    Not sure why the latest RBA statement went in over last months – but all good just note the comments above this reply are from LAST Months – below this month’s thanks 🙂


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