The Statement on Monetary Policy (SoMP) is published once a quarter by the Reserve Bank of Australia
- Its watched for the Bank's assessment of current economic conditions domestically and internationally
- And, of immediate interest, for their forecasts for Australian inflation and output growth (GDP)
Inflation, GDP forecasts little changed from the prior SoMP
- GDP forecast unchanged for June at 1.5-2.5% and December at 2.5-3.5%; upgrades outlook for June 2018 by 25 bps to 2.75-3.75
- Underlying inflation forecasts unchanged at 1.75% June 2017, 1.5-2.5% out to December 2018, 2-3 pct by June 2019
Unemployment rate outlook unchanged at 5.75% mid-2017 and 5-6% out to mid-2019
- RBA says an appreciating a$ would complicate economy's transition
(they always say that :-D )
More (Headlines from the SoMP via Reuters, any bolding is mine):
- Says December qtr GDP data confirmed the period of weakness in mid-2016 was only temporary
- Increased confidence on growth, inflation on stronger near-term global outlook and terms of trade
- Says wage growth unlikely to slow any further but will remain low
- Expected increase in underlying inflation still quite gradual due to low wage growth, heightened retail competition, low home rental growth
- Household income growth likely to stay weak, making it hard to be certain about future pace of consumption growth
- Forecast for unemployment rate implies ongoing spare capacity in labour market, likely to constrain wage growth going forward
- Further signs emerging that slowdowns in mining states - Queensland, Western Australia - are coming to an end
- Says difficult to know if and when a stronger and durable recovery in non-mining business investment might take hold
- Says residential investment will contribute less to growth in the period ahead than it did in the recent past
- If commodity prices do not fall as far as anticipated the impact on growth, employment could be greater than assumed in the forecasts
- Expects recent regulatory measures likely to lead to "some slowing" in housing credit growth
- At this stage higher commodity prices are not expected to add "materially" to domestic demand
- Expansion in LNG exports to add 0.5% to GDP in both 2017 and 2018
- Says major advanced economies expanding at rates "fast enough" to continue to absorb spare capacity
- Says China appears to have retained growth momentum in early 2017
- Says US yet to announce detailed tax reform proposals but any fiscal stimulus will add to demand, inflationary pressures
There is nothing to surprise in the Statement (if you've been paying attention). The main points are familiar .... the bank is concerned specifically about:
- Slow jobs growth
- Slow wages growth
- High household debt
- The impact of these on spending (i.e. not in a good way :-D )
- Slow recovery in non-mining sectors of the economy
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If you read today's statement (or even just this summary of it) in addition to my posts on Lowe yesterday:
- RBA Governor Lowe: Over time expect rates to rise in Australia
- More from RBA's Lowe: Lower rates would increase imbalances in the system
and the RBA decision on Tuesday:
- RBA announce no change to policy - cash rate left on hold
and maybe even scan the charts that the RBA is looking at on the economy:
- RBA May 2017 'Chart Pack' available now
then it would be difficult for you to be anything less than well-informed on the Australian economy, the outlook, monetary policy in Australia and the outlook for that. The RBA (and other policy makers) grapple with a murky outlook, and there is always the potential for surprise developments and shocks. Welcome to the real world.
Alternatively, by all means have a perma-bull or perma-bear view. I was speaking with Adam this morning (my time) and he reminded me I was coming up to my 5th year at ForexLive (time flies when you're having fun!). Much of those 5 years have been spent reading perma-bear remarks. Which are good for a laugh, but not much else.
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Here is the full text from the Bank: Statement on Monetary Policy- May 2017
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ps. As I update, iron ore down 8% in China (Dalian). Posting as an FYI. Oh and just seen on the MSM here in Oz ... Is the great China crash upon us?
We're all doomed! LOL.
