By Greg Peel

With the RBA board members pulling on their RBA board shorts in January and slapping on the zinc cream, this month's monetary policy meeting was the first since December. And things have been looking a little brighter in the global economy post-Christmas.

In December, the RBA declared recent global economic news to be "mixed". The US was looking slightly better and China had slowed only as intended by Beijing, but Europe was "notably weaker and it remained unclear as to how the current situation would be resolved", with an obvious nod to Greece. Moreover, there was "a non-trivial possibility of a very sharp contraction".

Australia's economy had also been looking a bit better, the RBA noted, and growth was consistent with trend, but of course "conditions varied significantly across sectors". There was a "major investment boom" underway which was a clear reference to the resources sector.

So in December, the RBA found itself on the horns. The board had cut the cash rate in November with Europe in mind but the local "boom" suggested no reason to cut again. However, the downside risk emanating from Europe had only increased and there would be a downside flow-on to Australia from any negative shock. So the decision was, noting inflation had pulled back inside the comfort zone, that another cut was a prudent decision under the circumstances.

Fast forward to February and further evidence of Australia's disparate economy. The February minutes, released today, noted "significant differences in conditions across sectors" and a "considerable degree of adjustment occurring in the economy". The problem is, however, the RBA has only one cash rate to control and only one currency to be mindful of.

It is perhaps noteworthy that the RBA used the expression "adjustment", and not some word more akin to "pain". This would tend to suggest the board feels that the so-called two-speed economy is not merely a fleeting response to immediate global issues but rather indicative of a shift of economic base for a new era. I'm only guessing here, but I'd suggest the RBA would assume the "pain" of adjustment is something the government can deal with fiscally while the central bank's focus had to remain on Australia's net GDP trajectory.

So again, the local economy provided no reason to cut ? not for a third time ? and perhaps would even offer reason to raise were inflation not safely within the zone. Status quo seemed the right decision locally before moving on to consideration of global issues.

On that point, the RBA suggested in the minutes that "While the financial situation in Europe remained fragile, the likelihood of an extremely bad outcome seemed to have diminished somewhat". In the meantime, US economic data had become "stronger" and China's growth while more moderate remained "robust". The board had already provided two rate cuts and those 50 basis points had been "passed through to most lending rates in the economy" to result in more average levels. With economic growth running around trend and inflation within the zone, the RBA saw no reason to go a third time just yet.

Neutral rate settings are nevertheless a comfortable place to be in comparison to the major world economies, given the RBA still has plenty of scope to respond should things turn dire again in Europe. Hence the board judged "that if demand conditions were to weaken materially, the inflation outlook would provide scope for a further easing in monetary policy".

So the RBA has our back.

And here we are sitting, waiting, yet again, for a hopefully positive decision from Europe regarding the endless rescue of Greece. In the meantime Australian banks have all ticked up their lending rates irrespective of the lack of move from the RBA. Interestingly, the next RBA meeting is on March 6 and on March 7 the Australian December quarter GDP result will be released. And between now and then, anything might happen.

Read the full minutes here.