Based on the RBA’s meeting about monetary policy this month, mortgage broker in Sydney Chan & Naylor sees no changes in the last few weeks.
The bank still has high expectations for the global economy, non-mining business investments and labour market conditions but it remains uncertain about household consumption – a key part of the country’s economy. The RBA also reiterated that a slow pick-up in inflation and economic activity is also possible with a higher Australian dollar.
According to the bank, the country’s unemployment rate has dropped and employment has grown strongly in the last year but the salary growth has not improved. However, the oversupply in the labour market is expected to gradually decline this year and this would lead to a gradual rise in wages growth.
The Sydney and Melbourne housing markets have slowed down recently but housing markets remain relatively stable. Household debt levels continue to remain high despite the easing housing growth and tighter credit standards reducing the risk of household balance sheets. Because of the uncertain outlook for consumption growth, household balance sheets still have to be carefully monitored.
Fortunately, the unemployment and inflation rates are improving because of last year’s low level of interest rates. This year, GDP growth could exceed expected growth and CPI inflation could increase to above 2%. It is still uncertain though whether or not the strong labour conditions will improve wages and inflation, and if the economy will grow above 3% in the next two years. But because of all these uncertainties, the RBA may not change current policy settings any time soon.
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