RBA Cite Broadly Balanced Risks
The RBA meeting minutes released overnight reflected optimism on behalf of the bank though did suggest some uncertainty in the outlook. The bank noted that underlying inflation is expected to return to normal levels over time and the overall assessment is that risks around inflation were “broadly balancedâ€. The economy was noted as growing close to potential over the next few quarters before picking up further, however, the RBA did note that a rising Australian Dollar could complicate the economic transition.
The upward revision to the terms of trade outlook was noted as a “marked change†and positive for the economy with members noting that bulk commodity prices have increased significantly.  The bank noted that holding policy steady at this meeting is consistent with growth and inflation goals. Additionally, the bank judged that there are some signs that wage growth had stabilised, but there is considerable uncertainty on labour market strength and whilst the jobless rate is expected to edge down, unemployment remains elevated.
The minutes also revealed the bank’s concern for the significant uncertainty around household consumption, especially for heavily indebted households. Referring to the housing market the bank noted that house prices have picked up in Melbourne and Sydney. Housing turnover and credit have slowed with a large supply of apartments to come on stream.
Finally, referring to global economic conditions the bank noted that a steadier China economy has reduced downside risks to the global growth outlook whilst risks to global inflation are also more balanced at this time.
In all the minutes reflected a positive tone with the bank noting the positive effects of commodity gains and the stabilising effect of a steadier China economy. Whilst inflation remains low; it is expected to pick up, and for now, the ban are comfortable with the AUD exchange rate though again, a higher AUD would complicate the outlook.
