RBA minutes: Measured optimism is the recurring theme - TDS

Analysts at TDS explain that the September RBA minutes saw no real changes in RBA thinking with measured optimism as the recurring theme.

Key Quotes

“Recent data has been consistent with a pickup in growth but the RBA cautions the need to balance risks of high household debt and low CPI. Just last week RBA board member Ian Harper played down the chances of a rate hike given economic growth was too weak to justify a hike.”

“However, we do note a slightly more positive take on the RBA’s outlook for jobs in today’s minutes as opposed to August. In the August minutes, “members noted there was some uncertainty about the effect any decline in spare capacity in the labour market would have on wage and price inflation.”, while in the today’s minutes,“a gradual increase in growth in wages and inflation was expected as the spare capacity in the labour market was reduced and the economy continued to strengthen, supported by the low level of interest rates.”.”

“So while slightly more upbeat, the RBA highlighted that a higher AUD would result in a slower pick-up in growth and inflation. At the same time, the Bank runs the risk that housing slows more sharply, which could be a problem given high levels of debt which the Bank has mentioned. As such there is nothing in today’s minutes to suggest the Bank is looking to hike rates and right now it is content with current policy settings.”

“The ABS measure of house prices for Q2 rose 1.9%/qtr, better than the 1.3%/qtr gain the market pencilled with prices on the year up 10.2%/yr. Looking through the split, the data confirms the two speed nature of Australia’s property market, with Sydney +2.3%, Melbourne +3 but prices in Perth were –0.8% and Darwin –1.4%. If auction clearance data is a guide, we may have seen a peak in house price inflation.”