August's monetary policy decision saw the cash rate left unchanged at 1.50%, as expected, although the bank made a series of observations about the current health of the Australian economy. Interest rates are not going anywhere soon.
While inflation is now sitting at 1.9 per cent - just below the bank's 2 per cent to 3 per cent target - the RBA noted at last month's meeting that inflation had increased somewhat since 2016, reducing the risk of deflation in the economy. "These are the two housing markets that have caused the most concern for policy makers because of the previously high rates of capital gain that had been running since early 2012, coupled with record high levels of household debt and high concentrations of investment", Lawless said.
This was the largest deficit Australia has recorded in the past three quarters, a figure driven by a drop in the surplus of goods and services of some 59%. The quarterly growth is expected to accelerate to 0.8 percent in the second quarter from 0.3 percent in the first quarter.
"I was a little surprised to see the decline in interest-only loans because they had been increasing as APRA had told the banks it wanted to see less investment and interest-only lending", he said.
"Retail sales have picked up recently, although slow growth in real wages and high levels of household debt are likely to constrain future growth in spending."
"This is likely to continue for a while yet, although stronger conditions in the labour market should see some lift in wages growth over time", it said.
'The recent data [has] been consistent with the Bank's expectation that growth in the Australian economy will gradually pick up over the coming year'.
The Australian dollar strengthened following the RBA meeting last night.
Current account figures for Australia were also released earlier on Tuesday, with data from the Australian Bureau of Statistics showing that the deficit widened by 4.8 billion Australian dollars (3.82 billion USA dollars), to sit at 9.56 billion Australian dollars (7.61 billion US dollars), while the primary income deficit grew by 499 million Australian dollars (397 million US dollars) to now total 12.159 billion Australian dollars (9.68 billion USA dollars), partly due to mining sector profits being paid to foreign owners. Dollar/loonie was trading 0.60% lower in the day at 1.2342.
Wage growth remains low in most countries, as does core inflation.
"The higher exchange rate is expected to contribute to the subdued price pressures in the economy", said Gov. Philip Lowe in an accompanying statement.
Markets appeared to largely overlook RBA warnings about the value of the Australian Dollar, which RBA Governor Lowe stated was "weighing on the outlook for output and employment".
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