From ANZ' weekly look at the economy in Australia, and what continued the risks mean for Reserve Bank of Australia monetary policy ahead
(in brief, bolding mine)
- Growth is spluttering along at a level we would characterise as just being above stalling speed
- We still see a modest acceleration in 2018, but ... notust enough to have any material impact on the unemployment rate
- We see an accumulation of evidence that households are under pressure... we have household consumption growing at around 2%, an appreciable move down from the 3% pace recorded in the year to March 2016
- Even this level requires some acceleration of wage growth. Recent experience and our subdued outlook for the labour market means there must be considerable risk this isn't achieved. In which case, growth will be lower again.
- This continued low growth/low inflation environment presents a significant policy challenge for the RBA and Government given the starting point of a low cash rate, fiscal deficits and high household debt.
- We think there is perhaps a one-in-four chance that the RBA will need to come back to the easing table, with the trigger being a notable rise in the unemployment rate. If it does then we think a discussion of QE options will most likely be part of the RBA package, though in the first instance we think the actual policy choice will be to cut the RBA cash rate. Laying out options for QE will, however, emphasise that this latest round of easing is not just a policy tweak. This is not yet our central case, but with growth just above stalling speed it won't take much downside surprise to get there.
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From this we can see the importance of watching the employment data, especially the unemployment rate. Also, note from ANZ's comments:
- perhaps a one-in-four chance
- not yet our central case
the bank's not expecting any imminent move - its more a waring that risks do seem elevated but not overly so.
