Remarks from WPAC Chief Economist Bill Evans on today's Reserve Bank of Australia Statement on Monetary Policy
Jumping straight to Evans' "Conclusion and Outlook for Policy"
(in brief)
- Forecasts unchanged
- Little doubt that the Bank is unlikely to be initiating a policy change any time soon
- However the tone of the Statement seems to support the view that if rates are to move in 2017 it will be to the downside
- Three key themes in this Statement: (1) the expectation of an extended period of overcapacity in the labour market with employment growth being marked down; (2) ongoing concern of the impact of oversupply in the apartment market weighing on house prices; inflation and activity (3) the view that the recent boost to commodity prices will be short lived and have limited impact on incomes and investment.
- WPAC is more optimistic about employment growth (and GDP growth at 3.3% for 2017) expecting a more significant tightening of spare capacity in the labour market.
- WPAC expect that strong pent up demand; a long construction pipeline; and buoyant foreign demand will ensure that the feared oversupply in the apartment market in 2017 will not eventuate
- We certainly buy the Bank's argument about the sustainability of the current bulk commodity boom but are now considering that it could last for longer than implied in the Bank's forecasts and provide a stronger boost to wages; profits and fiscal than implied by the Bank
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Separately, Westpac also out with commentary on today's retail sales data
(ps. My earlier posts on the retails sales data here and here)
In brief:
- Retail sales came in above market expectations for the Sep month
- But a worse than expected result for Q3 as a whole
- For Q3, ... all of the nominal gains came from higher prices with underlying sales volumes down slightly
- The previous quarter's 0.4% volume rise was also pared back to 0.3% taking annual real retail sales growth to just 1.2%yr, the slowest annual growth in five years
WPAC see some better news in the data, though:
- The monthly detail is a little more promising, suggesting household good retail saw a lift late in the month which may be the start of a (long awaited) lift in housing construction related spend.
