Within the 2,433 words of the Reserve Bank board minutes released this morning, there is one clear message: Monetary policy is working.
The RBA had already said it expected rates to remain on hold for “some time”. In the second-last paragraph, it’s made clear this expectation has been reinforced by recent events.
Crucially — and one of the reason Bill Evans changed his view on interest rates yesterday — was that: “There were further signs that low interest rates were providing support to activity, with improved economic conditions evident across a range of household and business indicators.”
At the time of the last meeting the labour market looked weak. But this was “consistent with conditions in the labour market usually lagging changes in economic activity.”
So the RBA will be mighty pleased now that labour force data has shown more than 80,000 full-time jobs were created in February.
Concerns about the exchange rate were not evident, with the minutes saying the Australian dollar “had appreciated a little, although it remained around 14 per cent below its peak in early April 2013”.
It was also noted: “the decline in the exchange rate seen to date would assist in achieving balanced growth in the economy”. That’s even though it was high by “historical standards”.
On housing, the RBA said: “Rising housing prices and household borrowing were expected results from the monetary easing that had taken place.”
But they are watching for a bubble forming, and highlighted the fact macro-prudential policies (non-interest rate policies to restrain lending – thing like LVR limits requiring a bigger deposit) were on the table.
All in all, this is a set of minutes that reflect a central bank that is satisfied with the job it has done, and is watching housing closely — confident that growth in Australia is secured for the foreseeable future.