A (non-gated) article in the Wall Street Journal: As Data Improve, Expectations for Aussie Rate Cut Fade , so it can be accessed and read by all.
The gist of it is:
- Recent data showed Australia’s inflation spiking sharply in the fourth quarter (see here, but note the ‘government inflation’ effect)
- A survey Tuesday showed business conditions at their best levels in close to three years (see this)
- Housing construction and house prices also are responding to the low rates (here)
- There is “compelling evidence” that retail sales are growing quickly (here)
The bottom line: When the RBA convenes Feb. 4 for its first meeting in nearly two months, it’s likely to conclude there’s no place for more cuts.
It’s a balanced article, noting that: “of course, not all indicators are pointing up”:
- Eonomic growth this year is still forecast to be below its long-term average of 3.0%. That compares with growth rates of 4% as recently at 2012
- Primary headwind is the slowdown in mining investment from record levels
- Falling commodity prices have forced mining companies to scrap new investment plans, shut mines and lay off thousands of workers over the past 18 months
- Job growth in December was the weakest in nearly 20 years (here). Still, officials feel the employment data reflect conditions in the economy several months ago, rather than right now.
The RBA will still be cautious next week, given the slowdown in mining investment and its impact on growth. But the debate over whether it needs to cut rates again can be put to rest for now.
