RBA March meeting minutes: Rising AUD would complicate economic transition

Author: Eamonn Sheridan | Category: Central Banks

(They always say that :-D )

Headlines via Reuters:

  • Judged steady policy consistent with growth and inflation targets
  • A rising AUD would complicate economic transition
  • Recent data suggested a "build-up of risks" in the housing market
  • Home prices strong and rising briskly in Sydney and Melbourne
  • Home investment borrowing had picked up, debt rising faster than household incomes
  • Slow growth in incomes could restrain consumption given high debt levels
  • Soft GDP wage measure suggests very little labour cost pressure in economy
  • Wages growth, underlying inflation expected to rise only gradually
  • Still difficult to assess momentum in labour market
  • Economic growth to accelerate gradually to above potential over next two years
  • Higher commodity prices could last longer than first thought given firmer global demand
  • Global economic outlook more positive, China set to support growth in the near-term
  • RBA members noted any move to protectionist policies in US would be harmful for global economy
Mmmm, scanning down those headlines is not a bad summary of the challenges facing the Australian economy (and RBA policy) .... home price strong growth is a constraint on further rate cuts ... debt growth is constraining household spending (debt servicing costs eating into disposable income) .... slow growth in income constraining spending ... 'momentum in labour market comment ....

On the bright side is this ... Economic growth to accelerate gradually to above potential over next two years .... mmmmm, hope they're right!

On the external environment ... they say China is looking supportive, but US is a risk

Meanwhile, AUD is little changed, up a few tics
Out at the same time was the Australian Q4 house price index
  • Up 4.1% q/q (expected +2.5%, prior +1.5%)
  • Up 7.7% y/y (expected +6.3%, prior +3.5% y/y)