Australia: Key events for the week ahead – Deutsche Bank

In view of analysts at Deutsche Bank, the key events over the week ahead for Australia will be the RBA's monthly board meeting and also the release of the August Statement on Monetary Policy.

Key Quotes

“We expect no change in the cash rate at the meeting, and any evolution in the post-meeting statement to be minimal - especially given the response by the market and the subsequent 'interpretive guidance' from the RBA following the release of the June minutes. That said, we would expect the Bank to note that the CPI was largely in line with the staff forecasts, and perhaps repeat the sentiment from the minutes that the recent strength in employment has mitigated some of the downside risk to the outlook for wages growth.”

“The recent strength in the AUD might also see a tweaking in the Bank's commentary. For the past year or so the Bank has noted that: "The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment." Consistent with the comments from the Governor on 26 July the phrasing might change to 'a lower Australian dollar would assist the economy in its transition following the mining investment boom'.”

“Turning to the Statement on Monetary Policy we see no reason for the RBA to change the forecasts contained in the May Statement. Specifically on growth we would expect a 3% forecast for December 2017 then a 2¾ to 3¾ range to June 2019. On the unemployment rate we think a 5¾% estimate for December 2017 and a 5-6% range through to June 2019. On core inflation a 2% point estimate for December 2017 and a 1½ to 2½% range to December 2018 and 2-3% for June 2019 seems likely. For December 2019 we would not rule out a 3-4% GDP growth number, a 4¾ to 5¾% unemployment rate estimate and a 2-3% core and headline inflation forecast.”

“On the data front the week sees building approvals data for June (we expect no change from May - I.e. 0.0% mom); the June trade balance (where lower commodity prices should see a smaller trade surplus in the order of $1.4bn); and retail trade for June (here we look for a flat outturn after two strong results for the month, while we expect retail volume grew 1.3% in the quarter with the deflator flat).”