Daily Commentary BY THE CURVE TEAM –

RBA Confirms Holding Pattern

7th of February, 2020

RBA confirms current thinking as data prints okay.

Governor Lowe gave very little away in terms of new information in his opening remarks to parliament this morning, neatly summarising the RBA’s recent thinking on monetary policy and the outlook.

It now seems that we are in store for an extended pause with a material deterioration in the data needed to push the RBA to cut again. The RBA is keen to see if the recent ‘gentle turning point’ that has been seen in the data of late, including yesterday’s update, continues over the months ahead.

Retail sales fell in Decemeber after the pull-forward effects of November’s Black Friday and Cyber Monday sales, as was widely expected. This volatility should wash out over time as the seasonal adjustments become more accurate.

Sales were down 0.5% over the month after the revised 1% increase in November. This followed a muted rise of 0.1% in October, taking the average monthly increase over the past three months to 0.2%. On a quarterly basis volumes recovered somewhat, growing by 0.5%; lifting annual growth up to 0.3%.

Australia’s trade balance was a little softer than expected in December at $5.2bln down from $5.8bln in November. This outcome was driven by a larger than expected rise in imports while exports were a touch weaker than expect on the back of softer commodity prices.

We should gain further clarity on the outlook in the quarterly Statement on Monetary Policy when it is released later this morning.

David Flanagan

Director - Interest Rate Markets