Today's decision statement from Governor Philip Lowe commenced by indicating slightly more concern around global economic conditions, in particular that the risks to the growth outlook "are tilted to the downside" because US-China trade tensions "are affecting international trade flows and investment as businesses scale back spending plans due to the increased uncertainty". This is consistent with the general deterioration in the data flow from offshore recently. As such, the RBA continued to highlight that, with growth outlooks facing major headwinds and given subdued inflationary pressures, other central banks are expected to ease policy rates.
Ahead of tommorow's National Accounts for Q2, the Bank appears to acknowledge that its forecast for GDP growth of 1.7% in annual terms will not be achieved. Though, the statement then goes on to say that a gradual strengthening is then expected "to around trend over the next couple of years". Factors cited as justifying this outlook include; support from recent rate cuts, tax relief, infrastructure investment, a more buoyant resources sector and stabilising housing market conditions, particularly in Sydney and Melbourne.
Since August's meeting the main developments domestically were updates on the labour market and wages growth. On the labour market, the governor continued to highlight strong employment growth and record-high participation in the workforce, though the unemployment rate had "remained steady at 5.2% over recent months". There was no change in the assessment of wages growth, noting that it "remains subdued and there is little upward pressure at present, with strong labour demand being met by more supply". With that being the case, the governor hinted at a softer inflation outlook; "inflation pressures remain subdued and this is likely to be the case for some time yet", although the description of its existing forecasts was retained in the statement.
A slight broadening was made to the final line to now read; "The Board will continue to monitor developments, including in the labour market, and ease policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time".
Overall, the Board appears to remain in wait-and-see mode following its recent rate cuts. Labour market developments still remain very important, though they are not the only consideration for policy given the headwinds from the global economy and a domestic growth outlook that looks likely to come under pressure. Markets have priced in the next rate cut being delivered at the November meeting.