Australia: Focus set to remain on RBA policy next week – Westpac

Elliot Clarke, Research Analyst at Westpac, suggests that for Australian markets, the RBA is set to meet for their August meeting next week on Tuesday and then release the August Statement on Monetary Policy (SoMP) on Friday.

Key Quotes

“Westpac expects the RBA’s 2018 and 2019 forecasts for growth and inflation to be unchanged, and for the extended horizon to December 2020 to show an expectation of progress towards a lift in inflation off the bottom of their 2-3%yr target range. More significant than these forecasts however are the risks we see to employment growth as the next Federal election nears.”

“The 2013 and 2016 election experience highlights the potential impact political uncertainty can have on job creation and hence activity growth. While the RBA will not incorporate these risks in their forecasts, to us they represent a real challenge to the RBA’s belief in above-trend growth in 2019, and instead argue in favour of our own view of sub-trend growth, circa 2.5%yr.”

“In the interim, the housing market is likely to remain the key area of uncertainty. CoreLogic price data to July show prices declining at a 5% annualised pace in Sydney and Melbourne.”

“Furthermore, we estimate that just over 80% of all dwellings recorded a price decline in the month, well up on the 50% that have seen price declines over the year. Arguably this is evidence of changes to lending standards now affecting a greater proportion of borrowers.”