The governor's assessment was that the bushfires and coronavirus "will temporarily weigh on domestic growth", though it is of interest to note that the previous description of the Australian economy appearing to have reached "a gentle turning point" was removed from this statement. Seemingly, the outlook is now seen to be more constructive, with the expected pick up in growth this year and next supported by low interest rates, tax refunds, infrastructure investment, a more optimistic resources sector and an anticipated recovery in the residential construction cycle. Additionally, the ongoing expectation is that the boost to house and other asset prices from lower rates will stimulate increased consumption spending through wealth effects. The governor also acknowledged the recent weakness in the Australian dollar by noting it was "around its lowest level over recent times" and that is also clearly being seen as a positive development for the domestic economy.
At the Board's previous meeting, the unemployment rate was at 5.3%, though over the inter-meeting period it fell to 5.1%, with the governor anticipating it to remain around this level through the year compared to the Bank's previous estimate of 5.25%, before easing to 5.0% in 2021. On inflation, Q4's CPI data provided no surprises and as such, the Bank's preferred trimmed mean measure is still anticipated to rise slowly towards 2% over the next couple of years.
From an offshore perspective, the governor offered a more upbeat assessment of conditions. Whereas the risks to the global growth outlook were previously described as "tilted to the downside" this reference was removed from today's statement and was replaced with the line; "There have been signs that the slowdown in global growth that started in 2018 is coming to an end", with the pace of growth expected to be stronger in 2020 than it was last year. This comes despite the uncertainty cited around the ongoing trade tensions between the US and China, as well as the coronavirus, though on the latter it was "too early to determine how long-lasting the impact will be".
In the final paragraph, Governor Lowe indicated the Board's wait-and-see approach was still the preferred course of action given the "long and variable lags" associated with the transmission of last year's rate cuts into the real economy. To that end, it was noted; "The Board will continue to monitor developments carefully, including in the labour market". There is still a preparedness for the Board the cut rates further given its explicit easing bias was retained in today's statement, though given the constructive outlook anticipated, it seems conditions will have to deteriorate noticeably for that to occur.