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Bill Evans, Research Analyst at Westpac, explains that the Minutes of the Monetary Policy Meeting of the Reserve Bank Board of Australia for September show little significant change from the August Minutes.

Key Quotes

“Even though this meeting occurred the day before the release of the June quarter GDP report, which showed that year to date growth was 3.4% compared to market expectations of around 2.8%, the minutes indicate that the Bank is becoming increasingly comfortable with their forecasts that growth will remain above potential. “Recent data had not changed member’s assessment that GDP growth was likely to remain above potential throughout the forecast period and inflation was likely to increase over time”.”

“In these minutes, that risk continues to be highlighted through noting uncertainties emanating from low wages growth. However, the recent volatility in global financial markets has prompted the Bank to add “risks associated with uncertainties from abroad” to the list.”

“The sentiment around the housing market is a little more cautious.”

“Sentiment around the labour market remains upbeat.”

“Since the August Board Meeting, the AUD had depreciated 3 ¼ per cent against the USD and 2 ¼ per cent on a Trade Weighted Index measure. The Bank continued to describe this movement as remaining within “the relatively narrow range of the preceding few years”. While the Bank acknowledges risks for emerging market economies, the fall in the currency is described as “helpful for domestic economic growth”.”


The overall tone of these minutes is somewhat more confident for the Australian economy than we saw in August. In particular, the Bank is keen to emphasise its forecast that GDP growth will remain comfortably above potential over its entire forecast period (out to 2020). It still sees risks around low wages growth and acknowledges recent adverse developments in the global economy but is clearly prepared to patiently observe developments with a continuing emphasis that “the next move in the cash rate would more likely be an increase than a decrease”.

Westpac is more cautious around the implications of falling house prices, an associated negative wealth effect, global economic risks, low wages growth, and political uncertainty. We expect that growth will slow from the current 3.4% to around 2.7% in 2019. A slowing growth environment is not consistent with any decision to raise rates. We recognise that the Bank continues to see household debt as a bigger risk to the economy than an extended period of low inflation. Accordingly, lowering rates to deal with low inflation does not appear to be a likely policy either.

We continue to expect that the Reserve Bank will keep the overnight cash rate on hold through to at least the end of 2020.”

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