– DECEMBER 2017 INSIGHTS BY THE CURVE TEAM –
- The cash rate remained at 1.50% for the entire calendar year in 2017 after the RBA left it unchanged again in December.
- Monetary policy in a number of jurisdictions is likely to shift over the year ahead.
- Domestically the RBA will be watching competing forces in the Australian economy.
- How these two key trends evolve over the year ahead will go a long way to determining Australia’s monetary policy setting.
Australian Economic Highlights
- Growth for Q3 came in a 0.6%, short of both the market and RBA’s expectations. The annual rate lifted from from 1.9% to 2.8% after the negative read from last year dropped out of the calculation. However the market and RBA were expecting an increase to 3%.
- CPI continued to disappoint, the headline figure only lifting 0.6% for Q3 with falls in fruit and vegetable and telecommunications prices contributing largely to the weakness. The RBA’s preferred measure, core inflation also remained below the band at 1.88% after a quarterly increase of only 0.35%.
- Employment data remained reasonably robust in October. The unemployment rate dipped another 0.1% to 5.4% despite a weaker than expected increase in jobs of 3,700 thanks to fall in the participation rate.
- The ANZ job ads report continues to suggest that employment growth will remain solid in the months ahead, with a second consecutive lift of 1.5% in November.
- After hitting a record high last month, the NAB business conditions index eased back from 21 to 12 as profitability and trading conditions eased back. Index is still well above long run average of 5. The Business confidence index should be closely watched as it continues to drift lower. After rising to a recent high of 14 in April it is now back it its long run average at 6.
- Consumer confidence continues to languish as weak wages growth and tightening credit standards continue to impact family finances. The index slipped back below 100 in November, falling 1.7% to 99.7.
- After a very weak run, Retail sales showed some signs of lift, rising 0.5% in October. It comes off the weakest quarter of consumer activity since the GFC according to the Q3 national accounts.
- Housing finance continues to be impacted by the macro prudential restrictions imposed by the council of financial regulators. Both the number and value of commitments for owner occupiers was down again in October while Investors posted a small lift after a solid fall in recent months.
- Australia’s trade surplus fall but evaporated in October, falling to $105m. Falling prices and volumes hit commodity exports while imports higher. Fuel imports accounting for almost half the increase.
- Building approvals remained stable in October with a small increase of 0.9%. The reinforces the recent trend seen throughout the year after their sharp fall in late 2016.
- Motor vehicle sales too remain quite stable and were unchanged in October from a month earlier.