The Reserve Bank of Australia meet today, here is another preview of what to expect
In (very brief), no change from the Reserve Bank of Australia is the unanimous expectation.
I've already posted on the RBA today here:
- Economic data due from Asia today - & its RBA meeting day
and here:
- Australia - RBA announcement due today, here is a preview
This now, via Bloomberg, a good overview of the factors the Reserve Bank of Australia is dealing with. The article is well worth reading in full, but in brief:
- Inflation creeping higher
- RBA('s) ... record-low cash rate is designed to steer the economy away from mining and toward services and manufacturing ... Governor Lowe has said there are signs that non-resources investment is finally lifting
- But cheap money has also sent Sydney and Melbourne house prices soaring and private debt to record levels
- Lifting interest rates in response is too risky: it would damage the economic recovery given slack in the labor market, record-low wage growth and inflation that remains tepid despite recent gains
- Australia's biggest export, iron ore, has fallen into a bear market, potentially undermining any boost to government revenues from an unexpected rally in prices last year
- The Aussie dollar, which normally tracks commodity prices, has remained fairly static around the 75 US cent mark, providing a headwind for key exports like education and tourism
- More positively, business conditions have improved recently
Also, on a bigger picture view:
- But it's the opportunities provided by the splitting of debt in the May 9 budget, flagged by Treasurer Scott Morrison last week, that could alter the equation. The government had been constrained on infrastructure spending by efforts to bring a budget deficit under control and ensure it doesn't preside over the loss of the nation's AAA credit rating.
- In distinguishing between so-called good debt used for productivity enhancing infrastructure and bad debt for recurrent expenses that should be met via tax revenue, it opens up options for the government.
- The move also has support from the RBA and the International Monetary Fund.
(any bolding above is mine for emphasis)
