– MAY 2017 INSIGHTS BY THE CURVE TEAM –
- The RBA once again elected to leave the cash rate on hold at 1.50% following their May Board meeting.
- Recent data has given the RBA confidence in their core forecasts.
- While key risks have abate, low wage growth and rising debt threaten to impact consumption and growth more broadly
- The cash rate is unlikely to change in the near term as the RBA assess competing forces impacting the overall setting of monetary policy.
Australian Economic Highlights
- Growth bounced back in Q4 with GDP rising by 1.1% for the quarter. The pick up in growth saw the annual rate of growth rise to 2.4%, ahead of the RBA’s forecasts. The improvement in some sectors could prove unsustainable, casting a cloud over the outlook for growth.
- CPI picked up inline with with market expectations in Q1. Headline inflation rose 06%, taking the annual rate up to 2.1% and back into the RBA’s target band. The RBA’s preferred measure, core inflation remained below the band at 1.8% after a quarterly increase of 0.45%.
- The employment data was firmer in March with total employment rising by 60,900 after a solid gain was expected. Despite the large increase, the unemployment rate remained elevated at 5.9% thanks to a 0.2% jump in the participation rate.
- ANZ job ads firmed a little in April, posting a gain of 1.4% after last months more moderate increase of 0.8%.
- The NAB business conditions index continued to run well above the long run average of 5 with the index edging up from 12 to 14 in April. The ongoing buoyancy in conditions finally saw an increase Business confidence with the index jumping 7 points to 13.
- Consumer confidence printed below the key 100 level for the fifth straight month in March as consumers remain cautious on their own finances, especially compared to a year ago even after two rate cuts last year.
- Retail sales are continue to suffer as a result of consumers lack of confidence in their own finances. Retail sales were down again in March, falling 0.1% for their third fall in the past four months. A telling sign of consumers being under pressure is the fall in cafe and restaurant sales which are the last small luxury to be taken out of the household budget.
- Housing finance collapsed in February driven by investors. The number of owner-occupier loans and the value of occupier loans were both down 0.5%. The value of investor lending was down 5.9%, more than offsetting the 4.6% increase the previous month.
- Australia’s trade surplus remained elevated in March after bouncing back in February. The trade surplus came in just short of expectation at $3.1bln a half a billion fall on the previous months surplus. The decline was a result of import growth outpacing exports.
- Building approvals collapsed in March, confirming that the peak of the construction boom is now behind us. The monthly fall led by apartments was 13.4% taking the annual decline to 19.9%.
- After stalling in recent month, Motor vehicle sales were up in March. Total sales were up 1.9% for the month, failing to offset the previous months 2.7% decline Despite the rise, sales are still down 3% over the year.