"Public spending is forecast to be quite weak," says RBA governor Glenn Stevens. Photo: Glenn Hunt
Well that was an easy Reserve Bank board meeting.
With the possibility of a pleasant upside surprise in the September quarter national accounts tomorrow, housing doing what it’s meant to be doing, households starting to borrow and invest a little more and our main trading partners looking better by the day, the only thing to do was to leave the cash rate steady, have lunch and adjourn until February.
Even today’s retail sales numbers were a little better, adding to the conviction that low interest rates are steadily doing their job.
The only immediate spoilers are the Australian dollar remaining stubbornly high and governments that are unlikely to be helpful, or, as Governor Glenn Stevens put it: “Public spending is forecast to be quite weak.”
While the meeting’s outcome was a forgone conclusion, the RBA-watching industry tends to get excited about whatever phrases change in the governor’s usual brief post-meeting statement.
That’s meant to be the way to divine any possible changes in policy.
Today’s statement had several, including a whole extra paragraph.
But they really just confirm that there is nothing happening to justify moving the cash rate one way or the other and that there’s nothing much on the horizon either.
The line about fiscal policy not helping was not there last month, but the RBA has been making its point about government spending plain enough in other places.
Optimistic about households
The bank sounds a bit more optimistic about the household sector borrowing and investing.
Last month’s observation that there is "continuing evidence of a shift in savers' behaviour in response to declining returns on low-risk assets” has had an extra sentence attached: “Housing and equity markets have strengthened further over recent months, trends which should in time be supportive of investment.”
On the other hand, there was another little escalation in the governor’s attempt to jawbone the still-too-strong Aussie. Last month he was sounding a little wishful about the currency, saying a lower level would “assist in rebalancing growth”, but now a lower level “is likely to be needed to achieve balanced growth”.
So we’re not going to achieve a successful transition away from reliance on resources construction unless or until the Aussie is in the 80s. That also was the effective message in last month’s monetary policy statement – growth stuck at around 2.5 per cent for 18 months if the Aussie remained at 93 cents, but with considerable upside if or when it weakens.
Thus this Friday night's US payrolls number may be more important for the Australian economy than local retail sales or our own unemployment rate.
Big enough growth in American jobs will strengthen speculation that the US Federal Reserve will slow its printing presses sooner rather than later.
That way a stronger greenback lies – as does a better Australian economy.
Michael Pascoe is a BusinessDay contributing editor.