Bill Evans, Research Analyst at Westpac, explains that the RBA minutes contain few surprises, although discussion on financial stability indicates that the Bank is relaxed with the likely impact on household spending.
Key Quotes
“Most of the themes in their discussion are similar to themes we have seen in recent minutes. On the international front, the language around trade policies is somewhat stronger, referring to “significant risks to the outlook”, rather than “material risk” in September.”
“The Board remains challenged by the outlook for household consumption growth even though in the June quarter it “had picked up”.”
“The outlook for dwelling investment is now described as “close to its peak”, although the Board points to a large pipeline of work yet to be done.”
“Consistent with previous minutes, the positive conditions in the business sector are noted with measures of business conditions remaining well above average.”
“Not surprisingly, given the strong employment report for August, commentary around the labour market remains upbeat with employment growth remaining stronger than population growth.”
“The Board noted that “financial market pricing implied that the cash rate was expected to remain unchanged for a considerable period”.”
“The Board remains upbeat about business conditions, the employment outlook, and government spending. On the other hand, it recognises the risks around the soft housing market, a peak in the residential construction cycle, weak household income growth, and potential risks around the global outlook.”
“Most forecasters are predicting that the Bank will be able to deliver on its longer-term preference to raise the cash rate during 2019. Westpac believes that those forces discussed above, that are likely to constrain growth and inflation, will linger for longer than others expect, and preclude the need for the RBA to raise the cash rate any time before the end of 2020.”
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