There were few changes in today's statement compared to last month. Since the last meeting, the National Accounts for the June quarter were released, which showed annual growth in the domestic economy increased by the fastest pace in nearly 6-years at 3.4%. This outcome was a little stronger than the RBA's forecast, and their expectation is that growth will continue to run above 3% in 2018 and 2019. The growth outlook is supported by non-mining business investment, public infrastructure spending, and resources exports. The household sector, facing slow income growth and high debt levels, remains the greatest source of uncertainty.
Despite the robust growth outlook, the RBA notes that while the unemployment rate — currently at 5.3% — is trending lower, it retains that view that progress towards full-employment — estimated at around 5% — will occur gradually over the next couple of years. Similarly, while the RBA notes that wages growth has lifted a little, it continues to expect that faster increases will occur gradually in line with the strengthening in the economy.
On inflation, the RBA has previously stated that it expects near-term inflation to decline due to once-off declines in administered prices (areas impacted by government policy). On that basis, last month's statement estimated headline inflation to fall to 1.75%Y/Y in Q3 but that figure was removed in today's release. It now simply states that inflation in 2018 is expected to be "a little lower than otherwise", which likely reflects some mitigation from recent increases in petrol prices.
In the property market, its commentary was adjusted to highlight the contrast between the owner-occupier and investor segments. While credit growth to owner-occupiers "remains robust", investor demand "has slowed noticeably". More generally, today's statement made a change noting that it is credit conditions rather than lending standards that are now "tighter than they have been for some time".
The final paragraph was unchanged reiterating the view that further progress in reducing the nation's unemployment rate and lifting inflation back towards target is likely to be gradual. Market pricing on cash rate futures currently points to the RBA remaining on hold at 1.5% for at least the next 18-months.
Despite the robust growth outlook, the RBA notes that while the unemployment rate — currently at 5.3% — is trending lower, it retains that view that progress towards full-employment — estimated at around 5% — will occur gradually over the next couple of years. Similarly, while the RBA notes that wages growth has lifted a little, it continues to expect that faster increases will occur gradually in line with the strengthening in the economy.
On inflation, the RBA has previously stated that it expects near-term inflation to decline due to once-off declines in administered prices (areas impacted by government policy). On that basis, last month's statement estimated headline inflation to fall to 1.75%Y/Y in Q3 but that figure was removed in today's release. It now simply states that inflation in 2018 is expected to be "a little lower than otherwise", which likely reflects some mitigation from recent increases in petrol prices.
In the property market, its commentary was adjusted to highlight the contrast between the owner-occupier and investor segments. While credit growth to owner-occupiers "remains robust", investor demand "has slowed noticeably". More generally, today's statement made a change noting that it is credit conditions rather than lending standards that are now "tighter than they have been for some time".
The final paragraph was unchanged reiterating the view that further progress in reducing the nation's unemployment rate and lifting inflation back towards target is likely to be gradual. Market pricing on cash rate futures currently points to the RBA remaining on hold at 1.5% for at least the next 18-months.
