– NOVEMBER 2019 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold at 0.75% in November as was widely expected.
- Market pricing for further action from the RBA has eased, in line with lower expectations of further monetary policy easing globally.
- Despite their best efforts to be optimistic about the outlook, the RBA contained a blunt message around wage growth and its implications for inflation and the broader outlook.
- As a result, risks remain skewed to the downside.
Australian Economic Highlights
Growth was in line with estimates in Q2, with the economy only growing by 0.5% as the weakness from the first quarter continued. The annual pace of growth slowed further from 1.8% to 1.4% and is likely to undershoot the RBA’s estimate this quarter.
Inflation pressures remains weak in Q3, with both headline and core inflation printing in line with expectations. The headline index was up 0.5% which saw the annual rate edge up to 1.7%, while the trimmed mean was up 0.4%, leaving the annual rate unchanged at 1.6%. Both were in line with the RBA’s forecasts.
The employment data was in line with estimates in September, with 14,700 new jobs created over the month. The unemployment rate fell slightly to 5.2% after the participation rate eased back 0.1% to 66.1%.
After stabilising last month, the ANZ job ads resumed its slide in October, posting a 1% fall. It continues the recent trend of softening job ads.
Business confidence posted a 2 point gain in October with the index back above zero. Business conditions remain below their long run average but gained 1pt to print at 3 for the month. The crucial Employment index continued its uptrend.
Consumer confidence continues to slide in October despite recent tax cuts and a third interest rate cut. It appears that the message that record low interest rates is sending is outweighing the lower rates. The index slumped 5.5% to 92.8.
- Retail sales had another poor quarter in Q3 with total retail volumes falling for the third time in the past 4 quarter to be down over the past 12 months. It is the first time retail sales volumes have gone backwards since the 1990s recession.
- After some big increases in July and August, Housing finance was mixed in September. The value of new credit to owner occupier’s continue to rise strongly while new investor pulled back. Despite the strong run of new credit, growth in outstanding credit continues to slow as mortgagees continue to repay their loans quicker thanks to interest rate cuts.
- Australia continues to post robust trade surplus’s, chalking up another $7.1bln in September. The positive this month was it was on the back of a rise in both imports and exports with both rising 3% for the month.
- Building approvals broke the recent downtrend with a 7.6% jump in September. Despite the bounce they are still down 19% over the year and almost 50% from their peak.