The RBA minutes for the December meeting revealed that policymakers were more upbeat on the global and domestic economic outlook. While maintaining a natural monetary policy stance, the minutes contained some hawkish ingredients, suggesting that recent data on employment and inflation have made the members more confident. The key concerns remained subdued wage growth and household consumption.

The last paragraph evidenced the central bank’s more upbeat outlook. As noted in the minutes, ‘the unemployment rate had fallen and inflation had moved closer to target’. It added that ‘recent data had increased confidence that there would be further progress on these fronts over the following year’. The minutes also acknowledged that ‘risks in household balance sheets had lessened’.

Yet, Australian economy is not without risks. Indeed, policymakers noted that the outlook for household consumption remains ‘a significant risk’ as wage growth remained low and debt levels were high. Yet, they added that its liaison program was ‘suggesting that moderate growth in consumption had continued into the December quarter’, citing the stronger-than-expected retail sales growth of +0.5% m/m in October. On the property market, RBA forecast that dwelling investment should ‘remain at a high level for the following year or so’.

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On the monetary policy stance, the RBA retained the view that ‘holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time’. It added that ‘how far and when stronger conditions in the economy and labour market might feed through into higher wage growth and inflation remained important considerations shaping the outlook.

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