Daily Commentary BY THE CURVE TEAM –


7th of July, 2020

The July Board meeting of the RBA arrives today with the outlook still hinging on the short-term recovery from Covid-19.

In recent remarks the, tone of key RBA figures was appearing to indicate that the trajectory of the economy, over the short term at least, was aimed toward their more upside scenario. Whilst the board meeting has little chance of a shift in policy, the markets attention will focus on whether recent outbreaks in the virus and the reimposition of lockdown in Melbourne has altered their forecast trajectory.

Data of recent weeks, has on average, showed gains as businesses reopen and consumers return to something that resembles normality. Nevertheless, most data point remain significantly below their levels of January and February.

ANZ jobs advertisements out yesterday showed a 42% uplift for the month, however the outright number remains well below 100,000 jobs for the month. To put that in perspective the pre-covid 5-year average hovered around 160,000 per month.

Another key for today’s RBA meeting will be their likely continued pressure on the government around stimulus flow. The Government is set to hand down their plan for the Jobkeeper, Jobseeker payment on July 23 and the RBA has been at length to stress that if these payments are turned off with a hard termination it will provide complications for the economic recovery.

The RBA appear to recognise that a long-term extension of the payment programs is troublesome for the government but has suggested that more tailored and specific extension for highly effected industry could provide a cushion as the program is wound down.

Data wise today there is nothing left to come out The only key piece this morning was the AIG performances of services index. In a worrying sign for the broader recovery the index printed at 31.5, down from 31.6 last month, showing no improvement in the performance of the services sector compared too May. The index has remained under a 50 level, indicating a contraction in activity, for 7 months now.

Matthew Dunshea

Client Relationship Manager