By Michael Pascoe
If you get down to counting syllables and numbering off phrases, the Reserve Bank governor’s brief post-board statement is a smidge more dovish than it was a month ago, but it still boils down to the RBA sitting pat until the North Atlantic breaks one way or the other – and then it will just be uncertain.
For those still hoping for or betting on a pre-Christmas interest rate cut, the most promising line in Glenn Stevens’ statement was a sentence that wasn’t there.
On the first Tuesday of August, the governor reported that “the board considered whether the recent information warranted further policy tightening” before deciding it was prudent to do nothing in light of the global financial market uncertainty.
On the first Tuesday of September, further policy tightening wasn’t even considered, despite ongoing concern about underlying inflation picking up. In place of the previous month’s consideration, today’s meeting resulted in a flat: “The board judged that it was prudent to maintain the current stance of monetary policy.”
But doves could also be disappointed that the RBA seems untroubled by domestic consumer caution, the impact of the strong dollar, very subdued credit growth and softer asset prices.
Those factors are all noted, but with a tone that suggests there’s nothing wrong with a bit of thrift after previous excess. If housing prices are off a couple of per cent after soaring in the credit boom, stiff.
(And all the better for our housing affordability problems given the inaction and ineptitude of all levels of government. After all, the governor did go on television earlier this year to specifically warn against betting on ever-rising housing prices.)
What counts most for the RBA right now is out of its control. The immediate outlook for Australian monetary policy remains in the uncertain and unreliable hands of American and European politicians. The doubts they have created over global growth is keeping the RBA sidelined, but the Martin Place mandarins are far from panicked about it:
“At this stage, little evidence is available to gauge any effects of the European and US problems on other regions. Prices for key Australian commodities have remained very high thus far, with growth in China continuing to look solid. As a result, Australia's terms of trade are now at very high levels and national income has been growing strongly. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions.”
The RBA basically remains cautiously optimistic about our part of the world:
“Overall, the near-term growth outlook continues to look somewhat weaker than was expected a few months ago. Beyond the near term, growth is still likely to be at trend or higher, unless the world economic outlook continues to deteriorate.”
So we wait to see if the North Atlantic nations manage to muddle through or contrive a disaster big enough to hurt our main trading partners. Thus far, it hasn’t happened and the RBA isn’t assuming that it will.
So: “In future meetings, the board will continue to assess carefully the evolving outlook for growth and inflation”.
You’d expect nothing else.
Michael Pascoe is a BusinessDay contributing editor