AS widely expected, the Reserve Bank of Australia has left the cash rate today at a record low of 1.50 per cent.
Comm Bank economist Michael Workman said there were no surprises in the RBA statement.
“Markets were expecting, and received, a ‘no change’ decision accompanied by a neutral statement without forward guidance,” Mr Workman said.
“The world economy is expanding at a lower than average pace and China’s growth is moderating. Bulk commodity prices have been firmer recently. On that point, today’s June quarter terms of trade rose by 2.3pc which is likely to boost the nominal GDP reading tomorrow.”
Mr Workman said the RBA commentary indicated growth would continue along recent lines with firm contributions from consumer spending, goods and services export volumes and new dwelling construction.
“The forward indicators of the jobs market, while mixed, point to reasonable jobs growth,” he said. “But against a background of low inflation and wages growth in the domestic economy.
“The housing market commentary remains interesting. We believe that the RBA feels obliged to reinforce their general message given the recent cuts to interest rates.
“The RBA sees the tighter lending guidelines implemented by APRA as reducing the risks that were building in the housing market. Additionally, the large amount of new supply to be delivered over the coming year, mainly apartments in the major cities, should moderate price growth in that segment.
The commentary on the Australian dollar was that an appreciating exchange rate “could complicate” the adjustment to different growth drivers.
“It followed the observation that the overall economy is making a successful transition away from mining‑led investment,” Mr Workman said.
“We have recently written on the scope for revision of the RBA’s inflation target and the chances of QE (quantative easing) in Australia if the wages and inflation downtrends continue.
“We still expect another RBA rate cut at the November meeting after the next inflation update in late October. After today’s RBA announcement, the markets are pricing in a 34pc chance of a November (Melbourne Cup Day) rate cut.”
Current RBA deputy governor Philip Lowe will be governor at the next RBA Board Meeting.
