RBA boss snubs rates pressure

RESERVE Bank governor Philip Lowe says he feels no pressure from his increasingly hawkish counterparts overseas to alter the central bank’s ratesetting stance and raise the cash rate.

The RBA also appears prepared to look through the latest weak reading on price growth, showing inflation is below its target band, after a surprise slide in the cost of petrol and food.

Dr Lowe said yesterday the shift towards rate increases elsewhere in the world had “no automatic implications” for Australia’s cash rate.

“Just as we did not move in lock-step with other central banks when the monetary stimulus was being delivered, we don’t need to move in lockstep as some of this stimulus is removed,” he said. “Our decisions will continue to be made within the framework of our medium-term inflation target.”

His comments echo those of his deputy, Guy Debelle, who spoke late last week as the Australian dollar hovered near two-year highs.

Dr Lowe sought to connect the dots between the workforce and wage pressures.

He said globalisation had increased competition for jobs, meaning workers were less likely to drive a hard bargain for a pay rise.

Yesterday’s weaker than expected quarterly inflation figures took some of the heat out of the Australian dollar.

Headline inflation grew just 0.2 per cent during the three months to June, undershooting market expectations of a 0.4 per cent lift.

It also left the CPI at 1.9 per cent for the year to June — down from 2.1 per cent three months earlier and back outside the RBA’s target band of 2-3 per cent.

Underlying inflation, which strips out volatile items such as petrol and tobacco, was up by 0.5 per cent for the quarter for an annualised pace of 1.8 per cent — a touch higher than the March figure.

The decline was largely down to a 2.5 per cent slide in petrol prices — up 5.7 per cent at the same time last year — and cheaper domestic travel and accommodation costs.