RBA Minutes: Fall in the AUD good for economy, no strong case for near term rate move

The minutes of the Reserve Bank of Australia Oct. 2 meeting released a couple of minutes ago showed the policymakers expect the weak Australian dollar to buttress domestic economic growth.

The minutes reiterated that the next move in interest rates is more likely to be on the higher side, although policymakers do not see a near-term rate move.

Key points

• Agreed holding rates steady a source of stability and confidence
• Next move in rates more likely to be up, no strong case for a near-term move
• Recent modest fall in AUD helpful for domestic economic growth
• Findings of the Royal Commission could lead banks to further tighten lending standards
• Important to measure the supply of credit so that economy continued to be supported
• RBA noted a modest increase in banks' funding costs, mortgage rates still low after recent rises
• Home prices had fallen noticeably in Sydney and Melbourne, following previous strong gains
• Uncertain on consumption given subdued income growth, falling home prices
• Data point to solid GDP growth in Q3, though likely to moderate from the pace of the first half
• Noted employment rose strongly in August, spare capacity had declined
• Average earnings still weak, subdued unit labor costs putting downward pressure on inflation
• Drought likely to reduce farm output, crop yields over 2018/19
• Global growth is seen solid next couple of years, despite recent softening in data
• Sino-US tariffs a significant risk to the global outlook