New RBA governor Philip Lowe says while much of Australia’s economic data improved in the previous month, there were some areas in which the figures had moderated.
“The global economy is continuing to grow, at a lower than average pace. Labour market conditions in the advanced economies have improved over the past year, but growth in global industrial production and trade remains subdued,” he said.
Unemployment has fallen, but “there is considerable variation in employment growth across the country”, Mr Lowe said, and despite a recent slowdown, household consumption continues to grow at a reasonable pace.
“Taking account of the available information, and having eased monetary policy at its May and August meetings, the board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time,” he added.
The RBA was also quite relaxed about a strengthening in some areas of the housing market, and is probably “waiting for the surge in apartment supply to cool property prices”, AMP Capital chief economist Shane Oliver said.
“Given the recent rebound in auction clearance rates, Sydney and Melbourne property prices continuing to growth solidly after huge gains over the last four years – 60 per cent in Sydney, 40 per cent in Melbourne – and the risk that the apartment building boom will go way beyond the point of being healthy, my view remains that the RBA is a bit too relaxed about home prices,” he said.
Mr Oliver pointed out that the RBA did not repeat its comments from its July meeting with regards to upcoming inflation data, suggesting “its bias on interest rates is neutral”.
Additionally, with inflation risks currently skewed to the downside, record-low growth in domestic wages, and the potential for further appreciation of the already high Australian dollar, Mr Oliver said a cut to the cash rate is likely to come at next month’s meeting.
“We remain of the view that the RBA will cut rates again at its November meeting when it reviews its economic forecasts after the release of the September quarter inflation data in late October.”