RBA minutes of July meeting cleared up some confusions in the market as it stated that “members continued to agree that the next move in the cash rate would more likely be an increase than a decrease.” Still, as the progress of wage growth and inflation will “likely to be gradual, “there was no strong case for a near-term adjustment in monetary policy.” Instead, “the Board assessed that it would be appropriate to hold the cash rate steady and for the Bank to be a source of stability and confidence while this progress unfolds.” Overall, the minutes reaffirmed the tightening bias of the central bank, but the rate hike will only happen at least deep into mid-2019.
On the economy, RBA noted that recent data has been consistent with the central forecast of GDP growth at a bit above 3% over 2018 and 2019. Non-mining business investments had “contributed significantly” to growth in Q1. Public infrastructure investment and business conditions “remained positive”. But consumption “remained a source of uncertainty”. Labor market outlook remain positive for solid growth ahead, with “vacancy rate” risen to historical high. And the conditions will lead to gradual decline in unemployment rate and push up wages.
