Here are 5 factors to watch out for ahead of the Reserve Bank of Australia meeting on March 3 ... will they or won't they cut rates again?
These are a nice summary from an article in the Australian Financial Review (gated): RBA rates decision: what might trigger a cut
In brief:
- Jobless rate has hit a 12-year high of 6.4 per cent last month, with further increases likely in coming months
- But if the coming data is benign or even upbeat, the bank will opt to stay on hold next month as a way of preserving its ammunition for future action and avoid heading too low too soon
There are five factors that bear close watching over the next few days:
The Australian dollar
- RBA believes further falls are needed to cushion the economy - and federal budget - against lower commodity prices
Capital expenditure (Thursday)
- Capex data provides a vital update on the speed of the economy's transition away from the reliance on resources investment to other drivers, such as services
- Officials at the Reserve Bank will be particularly keen to see what happens to investment intentions among firms for the next 18 months. If planned investment looks to be gaining ground - particularly outside mining - the urgency for another rate cut will ease
- The collapse in wages growth since the boom years of 2005 through 2009 - when they rose at an annual rate of no less than 4 per cent - is one of the primary reasons the economy is grinding along at a sub-trend pace, with rising unemployment the primary symptom
- Weak growth in incomes is bad news for the federal budget and for broad sectors of the economy, such as retailing
- According to Tuesday's weekly ANZ/Roy Morgan confidence index, spending intentions have collapsed to an eight-month low
Sydney house prices
- The reason the Reserve Bank board will be very loath to act so soon after February's rate cut
- Sydney house prices are likely to become even more dangerously inflated with additional rate cuts
- Friday's official data on investment loan growth will help confirm the house price boom isn't likely to slow anytime soon
- Economists predict construction spending fell 1 per cent, largely as building on major resources projects dries up. If that hasn't been offset by big gains in residential construction, the Reserve Bank will chalk it down as another reason to consider a rate hike
