RBA Governor Philip Lowe said:
- Australian economy expected to be stronger in 2018.
- “Businesses are reporting stronger business conditions than at any time since before the financial crisis.”
- Economy is “moving in the right direction and interest rates still quite low, it is likely that the next move in interest rates in Australia will be up, not down.”
- But “the board does not see a strong case for a near-term adjustment of monetary policy”, thanks to slow progress in unemployment and inflation.
Regarding the steel and aluminum tariffs of the US, Lowe slammed it as “highly regrettable and bad policy”.
- “History is very clear here. Protectionism is costly. It’s costly to the country that implements the protectionism, and it’s costly to everyone else. It’s just not the right thing to do.”
- “How damaging will this be remains open. If it’s just confined to the current higher tariffs on steel and aluminium, then I think it’s manageable for the world economy.”
- However, “this could turn very badly, though, if it escalates.”
RBA is generally expected to keep rates on hold throughout 2018, except that NAB predicts one hike. Slowing growth in Q4 and risk of trade wars would add to the case for RBA to stand pat.