Daily Commentary BY THE CURVE TEAM –

Data Bounce Ahead of RBA

3rd of November, 2020

The latest data adds a level of complexity to the RBA’s meeting today.

At today’s meeting, the RBA is widely expected to move to a more accommodative setting of monetary policy by announcing a raft of changes to various new policy measures as well as the cash rate.

There is some doubt over the traction that further easing might gain at this time. However there is no doubt that previous moves are gaining traction is some parts of the economy.

Some of yesterday’s data points showed that both monetary and fiscal policy changes over the past few months are having the desired effect. New home loan approvals continue to surge. Overall approvals jumped again in September while low rates continue to drag renters into the homeowner market despite evidence of rents also falling sharply. Building approvals also surged with the governments homebuilder policy helping lift private home approvals.

It does pose the question of whether further easing is needed at this time. The RBA already has doubts over how much more traction it can gain and whether or not it would be best to wait until the economy really opens back up.

One data point that would support the RBA’s desire to do more today was the latest monthly inflation data. The monthly inflation gauge saw prices fall 0.1% in October with the annual rate sitting at 1.1%. The trimmed mean made for more grim reading with the annual rate now falling below 0%, indicating outright deflation.

We now wait for 2:30 when we will know much more about the latest update from the RBA and what it means for the outlook.

David Flanagan

Head of Money Markets