Re-balancing Remains RBA's Focus
By Rudi Filapek-Vandyck, Editor FNArena
At its final meeting for calendar 2013, the Reserve Bank of Australia (RBA) has sliced off a further 25bp to bring the official cash rate down to 3.00%, as widely expected by (most) economists and commentators.
Key assessments, judging from today's Statement by RBA Governor Glenn Stevens, were the fact that the peak in the mining capex boom is near while inflation is likely to remain contained and early improvements for the global economy are still offset by ongoing uncertainties in the US and in Europe. Nothing we already didn't know.
Stevens' statement also makes a reference to the Australian dollar which remains stronger against most other currencies than would have been expected on the basis of changes in commodity prices and Australia's terms of trade. Again, nothing we didn't already know. Besides, what are Stevens and Co going to do about it?
Probably the most interesting paragraph in today's statement is the following:
"Private consumption spending is expected to grow, but a return to the very strong growth of some years ago is unlikely. Available information suggests that the near-term outlook for non-residential building investment, and investment generally outside the resources sector, remains relatively subdued. Public spending is forecast to be constrained. On the other hand, there are indications of a prospective improvement in dwelling investment, with dwelling prices moving a little higher, rental yields increasing and building approvals having turned up."
And that's why yet another 25bp has gone off the official cash rate. The Australian economy has to re-balance away from resources capex, but the most obvious sector to support this re-balancing is the local building sector and any improvements witnessed to date remain "green shoots" at best. A little help was thus welcome and the RBA has delivered just that.
No indications are given about what the RBA thinks lies most likely ahead. So we can all continue speculating and debating about how many more cuts will be needed to achieve a soft landing in Australia next year.
For the full statement as released today via the RBA website: CLICK HERE.
The Bank of Queensland ((BOQ)) has already announced it will only pass on 20bp to its mortgage holders.