What the RBA will discuss tomorrow

Mon, 01 Feb 2016  |  

The article first appeared on the Yahoo7 Finance website at this address: https://au.finance.yahoo.com/news/what-the-rba-will-discuss-tomorrow-011702412.html 


What the RBA will discuss tomorrow

There is next to no chance of an interest rate change at tomorrow’s meeting of the RBA Board with the economy travelling well in the early part of 2016.

Since the last meeting of the RBA in December, the hard news on the economy has generally been good. Retail sales growth remains expansive, the labour market has continued to improve and export volumes are strong. The house price boom has clearly ended, but there is no evidence of anything other than a soft landing, something that the RBA will rejoice. Housing construction is off the boil but remains at an elevated level, aided by strength in alterations and additions to existing dwellings.

Last week’s inflation data would, in isolation be screaming “rate cut” given the headline rate remains below the bottom of the RBA 2 to 3 per cent target with the underlying measures of inflation dropping to one of the lowest rates on record. But the RBA is alert to the medium term risks of somewhat higher inflation given the still low level of the Australian dollar and a further probable tightening of the labour market.

In the global economy, the RBA will no doubt be a little uncomfortable with the news from China where growth has slowed and disinflation pressures have intensified. The market ructions over the past month will also attract a lot of discussion including the extent they pose a threat to the robustness of the economy.

Offsetting that is the positive news of monetary policy decisions from the Bank of Japan, which cut interest rates below zero and the US Federal Reserve to leave rates steady at near record lows. Outside oil, which is not being priced according to long run fundamentals, the RBA is also likely to be content with the broad trend for commodity prices. Iron ore seems to been resilient in the low $US40s a tonne, other metals such as copper, nickel and gold have also, it appears, found a floor and have been moving higher. The fact that the Aussie dollar has been a couple of US cents either side of 70 is welcome given this is providing stimulus to the export sector and with that bottom line GDP growth.

The outlook for the economy the RBA will be looking at tomorrow is framed around a return to 3 per cent real GDP growth over the next year to 18 months, the unemployment rate being stable near 6 per cent in the near term before edging towards 5.5 per cent within the next year and for inflation to edge up to around 2.5 per cent from the current low level.

With this outlook, and with interest rates already at super-stimulatory level, the case for yet lower interest rates is weak. Conversely, the low inflation climate makes the odds of an interest rate hike similarly close to zero.

Probably the most interest part of the RBA meeting will be the scenario planning. What if the Chinese slowdown and market ructions spreads further? How would the local economy respond to a sharo rebound in commodity prices? Is the cooling in housing posing any threats to the inflation outlook?

There will no doubt be more possible threats to the current steady state to contemplate. The end point is quite simply that the RBA will hold interest rates for now and probably for many months to come.

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Wed, 29 Jul 2020



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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/the-governments-test-in-2020-220310427.html   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced.