All the talk and focus last week was on offshore events with the UK election, the European Central Bank meeting and the US congressional testimony by former FBI chief James Comey. With the ECB leaving rates unchanged and Comey’s testimony revealing no surprises, the focus turned to the UK election result where Theresa May’s ruling Conservatives held onto power but lost their majority – commentators are now saying the decision to hold an early election has backfired and speculation begins as to what this will mean for the transition to Brexit.
Locally we had the regular monthly RBA board meeting last week where they once again left the official cash rate unchanged at 1.5% (as was widely expected). The accompanying statement was similar to last month, with little hint of any change to the policy rate in the near future. The RBA remains upbeat on the global outlook, domestic business conditions and non-mining investment outside the regions impacted by the mining downturn. The recent fall in iron ore and coal prices has been “as expected.”
The forward looking indicators of the labour market are seen as positive for employment growth. The RBA continues to project economic growth will increase gradually to a little above 3% and projects inflation will increase gradually as the economy strengthens. On the housing market, the RBA notes “Prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease”. The RBA retains a “neutral bias” with rates firmly on hold for now.