– April 2019 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold again in April making 32 straight months that the cash rate has been at 1.50%.
- Global growth concerns continue to intensify.
- These concerns are starting to impact the outlook for monetary policy in a number of jurisdictions.
- The RBA continues to make subtle shifts to their current assessment of both the global backdrop and domestic outlook which could have implications for monetary policy.
Australian Economic Highlights
- Growth disappointed again in the fourth quarter with the economy only expanding by 0.2%. Annualised growth over the second half of 2018 was 1% compared to almost 4% in the first half of the year.
- CPI slightly exceeded expectations in Q4 with headline inflation rising 0.5% while core inflation rose 0.4%, in line with expectations. The annual rate of headline inflation inched further below the RBA’s target band to 1.8%, while the core annual rate stayed at 1.75%.
- The employment data was mixed in February with total jobs growth slowing to 4,600 for the month. Despite the slower month, the unemployment rate actually fell from 5% to 4.9% after the participation rate also fell 0.1%.
- The ANZ job ads continue to point to a slowdown in employment growth with another sizeable 1.7% fall in March; however, ANZ does note the vacancy data and jobs ads have been diverging for some time which they suggest is due to a structural shift in how companies advertise for jobs.
- Business confidence continued to ease in March with the index dipping from 2 to 0 as uncertainty over the outlook continues to grow. The fall comes despite business conditions rebounding from 4 to 7. The employment index, while below the solid levels of 2018, still points to reasonable jobs growth over the months ahead.
- After rebounding in February, Consumer confidence fell heavily in March with the 4.8% decline taking the index below the key 100 level once again. Prospects of an interest rate cut helped boost confidence the prior month before the weaker than expected growth number and what it means for the outlook undermined consumer confidence.
- After a dismal holiday season, Retail sales recovered somewhat, bouncing 0.8% in February. While the gains were largely broad based, food retailing was the biggest contributor suggesting caution should be taken when extrapolating the result as a sign of renewed consumer activity.
- The downward trend in housing finance remains firmly in place. Both owner occupier and investor loans fell heavily in January. Further house price declines suggest new credit generation remains weak so far in 2019.
- Australia recorded its largest trade surplus on record in February thanks to a small rise in exports and falling imports. Rising commodity prices continue to lift the value of exports while softer domestic demand is reflected in the weakness in import values.
- Building approvals surged in February, posting a remarkable 19.1% increase in total approvals. The gains were driven by an unexpectedly large number of apartment approvals in NSW and QLD. Despite the bounce, total approvals are still down 12.5% over the past 12 months.