The Minutes from this month’s RBA Board meeting have just been released and unsurprisingly follow the script of the Governor’s statement from two week’s ago.
There are two key takeaways from the Minutes.
Firstly, the RBA is happy with the way the economy is transitioning from mining investment:
while falling mining investment and weak public demand were set to constrain growth for some time, there were early promising signs in other parts of the economy. In particular, a strong pick-up in dwelling investment was in prospect and there was some evidence that consumer demand had strengthened a little.
Which is good news.
But they also note the transition from investment to production is also helping exports, with indicators remaining “strong” while overall business conditions “were generally higher than they had been in 2013.”
This is a positive take on the economy, even if earlier in the minutes they were cautious on the labour market.
The second key theme in these minutes is that the RBA recognises the benefits of the fall in the Australian dollar would be truncated somewhat by its recent rally.
the exchange rate remained high by historical standards. Despite commodity prices falling further over the past month, the exchange rate had appreciated a little further. While the decline in the exchange rate from its highs a year earlier would assist in achieving balanced growth in the economy, this would be less so than previously expected given the rise in the exchange rate over the past few months.
So on balance, they repeat that they believe they have policy settings right at the moment, with monetary policy “appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the 2–3 per cent inflation target.”
Rates are on hold for a while yet, particularly if the Aussie dollar stays high. But watch out for an upgraded employment outlook after the May board meeting.
You can read the full minutes here
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