This is likely to be the shortest commentary I’ve written in quite some time. The truth is, there’s not a whole lot more to tell when it comes to the story of Governor Glenn Stevens and his beleaguered board of the RBA…until next month’s instalment.
This month the cash rate was – yawn – left at 2% for a fifth consecutive month and tellingly, the statement released to advise us of this widely anticipated outcome was virtually a reprint of the central bank’s September cliff-hanger.
It goes something like this…
Equity markets that were starting to demonstrate considerably more volatility throughout August continued to demonstrate said volatility into September. However, “the functioning of financial markets generally has not, to date, been impaired.”
In September, the RBA stated that it was “working with other regulators to assess and contain risks that may arise from the housing market.”
Then in October, “Regulatory measures are helping to contain risks that may arise from the housing market.”
Overall, Governor Stevens summed it up nicely when explaining where the RBA currently stands on interest rate settings at a recent House of Representatives Economics Committee inquiry…
“I think we are pretty content where we are right now.”
Up or down? What comes next?
The next obvious question then is when and how will interest rates eventually move? Many analysts argue that there’s not a lot of reason to reduce rates further, compared with the justifications to start raising them once more.
Some of the positive contentions to support the possibility that Australia’s economy is starting to awaken after a little nana nap include:
- Car sales are at record highs
- Building approvals are at record highs
- Job ads lifted for 14 of the last 16 months
- Employment has posted the biggest 6-month gain in 4.5 years
- Manufacturing and services sectors are expanding
- The Aussie dollar has fallen by around US17 cents over the past year
These tidings could indeed provide compelling justification for the RBA to think about an upward move on rates as we head into 2016.
Particularly as the only other change noted in the board’s October minutes was an acknowledgement that, “Dwelling prices continue to rise strongly in Sydney and Melbourne.” Melbourne didn’t get a mention in its September statement.
Truthfully though, the ongoing poker face we’re seeing from the RBA is making it increasingly difficult to predict with any certainty what way its next move will be, or even when.
Up, down or maintaining that steadfast neutrality of the past six months? I guess we’ll know more in two weeks time.