Westpac's analysis on the Reserve Bank of Australia Statement (from Governor Lowe accompanying the monetary policy statement on July 4)

This is, of course, in brief, but the major points WPAC hit (any bolding is mine):

statement ... largely the same as in June with no substantive changes to the key closing paragraphs and other tweaks mostly minor and even-handed in terms of policy implications.

Only really four changes:

  1. On commodity prices, last month's observation that "prices of iron ore and coal have declined over recent months as expected" is dropped with the July statement simply noting the "rise in commodity prices over the past year has boosted Australia's national income";
  2. On the global inflation backdrop, the Governor has added a line noting that "wage growth remains subdued in most countries, as does core inflation";
  3. On growth domestically, the statement seems to take a less positive view: the slowdown in the March quarter which was previously viewed as "reflecting ... quarter to quarter variation" now described as only "partly reflecting temporary factors"; consumption growth viewed as subdued and reflecting slow growth in real wages and high household debt; and the line reaffirming the Bank's positive medium term outlook for growth to increase gradually to "a little above 3 per cent" was dropped
  4. On labour market conditions, the Governor's statement removes last month's observation that "growth in hours worked remains weak".

Notably absent:

  1. any hawkishness around the medium term policy outlook
  2. absence of commentary around labour market slack ... - aside from solid gains in jobs and hours worked, the May labour force survey also showed a surprise fall in the unemployment rate to 5.5% and in wider measures of labour market slack that include underemployed workers. That suggests the Bank may be wary of making too much of these latest observations, particularly given the more uncertain link to wages growth.


  • statement gives little additional information
  • The minutes may provide some additional insight


  • we suspect the Bank will continue to hold a pointedly neutral stance on policy guidance
  • The August meeting could see a more material review of its commentary, with a key update on CPI inflation due July 26 and the Bank reassessing its economic forecasts ahead of the August Statement on Monetary Policy (due out August 4)
  • we continue to see no reason to change our current view that the official cash rate will remain on hold throughout 2017 and 2018