The RBA Minutes Are Out - Here's What You Need To Know

The RBA has just released the minutes for the July board meeting and unsurprisingly they show a rising level of concern about both the persistence of the Aussie dollar and the fall in consumer confidence.

For the moment, even though Glenn Stevens said on the weekend he wants to change the language around the period of stability in rates, it remained unchanged in this month’s minutes. The minutes ended with the statement that:

“With the significant degree of monetary stimulus already in place to support economic activity, the Board judged that, on present indications, the most prudent course was likely to be a period of stability in interest rates.”

On the Aussie dollar, the minutes highlighted again that the currency is not doing its job in helping foster growth given other factors at play in the economy.

“The exchange rate remained high by historical standards, particularly given the declines in key commodity prices, and was therefore offering less assistance than it otherwise might in achieving balanced growth in the economy.”

The Aussie dollar, which was trading at 0.9384 just before the release, is now trading slightly higher at 0.9398. It seems traders were a tiny bit worried about stronger rhetoric in the minutes.

Other key takeaways are:

  • The growth in Q1 GDP was mostly mining and the rest of the economy was weak. “Excluding resource exports, GDP growth had still picked up but was less than 2 per cent over the year.”
  • Labour market conditions have improved but aren’t great with forward indicators “consistent with only moderate growth in employment in the months ahead.”
  • Importantly, given governor Stevens’ focus on incomes as a driver of retail consumption over the weekend, the minutes reflected that “the recent national accounts data indicated that unit labour costs were little changed over the past year, reflecting low growth of wages and above-average growth of productivity.”
  • The RBA noted also that mining investment had fallen sharply but dwelling investment has surged “close to the fastest pace seen in around a decade.”
  • So it’s a patchwork economy in transition from a mining boom to something more balanced, and the RBA once again is in no rush to increase interest rates any time soon.

    Now if only the currency markets would listen on the Aussie dollar so the rebalance can begin…

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