RBA Meeting Minutes: The Good and the Not-So-Good

Fresh off the press today is the record of the latest RBA monetary policy meeting! Here’s a quick rundown of their economic outlook and what it could mean for the Australian dollar.

The Good

Let’s start with the good stuff. RBA policymakers agreed that signs of improvement can be seen across the Australian economy, mostly in non-mining investment and resource exports. Aside from that, they also noted that the housing sector is showing a decent pickup, as building approvals and home prices continue to climb.

When it comes to the jobs market, policymakers admitted that it might take some time before the unemployment rate improves yet they pointed out that a few green shoots in labor demand can be seen. For now, economic slack might keep wage growth weak, as reflected in Australia’s dismal jobs report for July.

As for trade activity, RBA Governor Glenn Stevens and his men noted that the recent pickup in China’s growth and production could keep Australia’s commodity export industry supported.

The Not-So-Good

On the other hand, the minutes indicated that economic growth is likely to remain subdued for the next few months. Apart from projecting a below-trend GDP for the second quarter of the year, RBA officials also noted that falling mining investment and fiscal consolidation could continue to weigh on growth until 2015.

As expected, policymakers also blamed the overvalued Australian dollar for dragging growth prospects lower and for keeping inflationary pressures at bay. For now, they expect core inflation to stay on target for the foreseeable future. Geopolitical tension and uncertainty about the Fed’s rate hike timeframe also added more risk elements to the table, according to the minutes.

All in all, the latest RBA meeting minutes confirm what everyone was already expecting – that the Aussie isn’t likely to enjoy any interest rate hikes for the time being. At the end of the day, the minutes reiterated that “the most prudent course was likely to be a period of stability in interest rates.”

The Australian dollar seemed to react positively to the report, as the tone of the minutes wasn’t as dovish as expected. However, the longer-term direction of the currency may be just as uncertain as the RBA’s economic outlook. Do you think the Aussie is in for a lot of consolidation from here?