RBA still open to rate cuts - Westpac
WESTPAC chief economist Bill Evans believes the minutes of the last meeting of the Reserve Bank, released on Tuesday, indicate the RBA is retaining an easing bias on monetary policy -that is, it is still open to rate cuts -- because of concerns about the economy and the elevated Australian dollar.
‘‘Today’s minutes support our view that there will be no change in October but by the time of the November meeting the board will be able to assess: whether business and consumer confidence hold up following the exuberant reaction to the election result; more information around the Australian dollar, which is clearly a source of concern for the bank; more data around the labour market; and of course the September quarter inflation figures,’’ he said. ‘‘We still favour prospects for a cut in November while recognising that waiting until December would not be a policy mistake. A December decision would provide even more information around those factors.’’ Mr Evans noted the tone around the description of the economy was subdued: ‘‘firms’ capital expenditure plans for non-mining investment remained subdued for the coming year’’; ‘‘mining investment was likely to decline noticeably’’; ‘‘growth of house- hold consumption ... had been below average’’ ... and ‘‘retail sales growth had been only modest in recent months’’; ‘‘labour market conditions remain somewhat subdued ... (and there was) a decline in the employment to population ratio’’. Mr Evans added that his assessment of this commentary did not indicate that at this stage there are any concerns in the RBA about an overheated housing market.