By way of comparison, there was little change to the wording in this statement from the previous month. Conditions in the global economy were acknowledged as having continued to soften through the early part of the year. In particular, trade tensions remains a key factor contributing to uncertainty. Meanwhile, financial conditions had eased referencing lower long-term yields, improvements in equity markets and a moderation in the cost of short-term bank funding in Australia.
The Bank remains notably upbeat on the labour market, highlighting that "there has been a significant increase in employment and the unemployment rate is at 5%". Other assessments around an expected further decline in the unemployment rate and a gradual lift in wages were unchanged.
Ahead of tomorrow's Q4 National Accounts, the Governor noted that "other indicators suggest growth in the Australian economy slowed over the second half of 2018". However, it then went on to reiterate the upbeat outlook of the Bank, namely a forecast for above-trend growth in 2019 driven by business investment, public demand, and strong employment. The main risk to that assessment, at least domestically, is from some form of a wealth effect from the impact of falling property prices on household consumption growth. This and household income are the key points to focus on in the Q4 National Accounts.
On the housing market, the statement noted that "the adjustment in the Sydney and Melbourne housing markets is continuing" and that "conditions remained soft in both markets". Tighter credit conditions and a "further" easing in the demand for credit by owner-occupiers were highlighted.
The Bank reiterated its expectation for underlying inflation to pick-up to 2% by year-end and then to 2.25% in 2020. The wording of the final paragraph was unchanged.
Tomorrow, RBA Governor Philip Lowe is scheduled to deliver a speech titled "The Housing Market and the Economy" at 9:10am AEDT at Australian Financial Review's 2019 Business Summit in Sydney. This could provide more nuanced insights than is typically conveyed in these monthly statements.
