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In view of analysts at TD Securities, the latest RBA Minutes released today of the Board’s meeting two weeks ago (when the cash rate was cut to 0.75%) showed there was a lot more discussion around the effectiveness and transmission of monetary policy given the low level of rates and whether the cash rate should be cut.

Key Quotes

“The Bank took the view it would be more prudent to cut now to strengthen the starting point of the economy. The RBA acknowledged policy stimulus may be less effective now, in that borrowing may not pick up substantially even with low rates, but its belief in transmission through the exchange rate remains high.”

“What does surprise us a little though was only 2 references to ‘full employment’ in the last paragraph of the Minutes, and no deeper discussion on this elsewhere in today’s release. So it does raise the question whether the market over-emphasised the Bank’s focus shifting from ‘reducing unemployment’ to ‘full employment’ and for the Bank to deliver another cut as early as next month (not our view).”

“Even if Sep job numbers are soft on Thursday, there is nothing to suggest the RBA is likely to cut as early as next month but today’s minutes do not rule out a cut as early as Dec.”