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RBA Minutes: Domestic growth outlook unchanged - TDS

Nov minutes saw the RBA keeping its domestic growth outlook unchanged, but the RBA’s emphasis on ‘uncertainty’ was clearly noted, getting 3 mentions, but none in the Oct minutes, points out the research team at TDS.

Key Quotes

“Note as well that Dep Governor Debelle’s speech in late Oct was titled ’Uncertainty’ as well. The Minutes of the Nov meeting indicate the ‘uncertainty’ for the RBA revolves around consumption and wage pressures with both risks appearing to be skewed to the downside. We note the two following quotes from the Nov RBA Minutes:

“Members noted that the outlook for consumption growth depended on the outlook for household income growth, which remained uncertain.”

AND

“Members noted, however, that there was considerable uncertainty around when and how quickly wage pressures might emerge and about how much these would add to inflationary pressure.”

“So even though the Bank is upbeat on non-mining business investment, domestic labour market conditions and global economic conditions (the Bank has been positive on all 3 segments for sometime), weak wages growth could lead to softer spending. Add to this deflationary pressures in retail and the slowdown in housing, particularly Sydney, the uncertainties around the household sector remain high. Until the RBA has gotten a better grip on these uncertainties, it appears likely the RBA will remain on hold for sometime. The RBA hasn’t openly said it, but it appears the best hope for the Bank is for a slide in the AUD to stoke inflation. Bonds are close to unchanged on the session (3yr and 10yrs ACGBs were 2-3bpos higher in yield on the open), while the AUD is at 5mth lows.”

“Earlier today, APRA Chairman Wayne Byres indicated that ongoing caution in mortgage lending practices was warranted despite latest initiatives announced in March to curtail lending to investors, (particularly on interest only loans) has had an impact (23% of loans were interest only in Q3). The Chairman noted that the overall rate of non performing house loans was trending up towards post-crisis levels, without any signs of stress.”

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