Political turmoil in Canberra dominated the headlines last week. The whirlwind week of rumour and intrigue was essentially a case of history repeating as we start this week with a new Prime Minister in Scott Morrison (Australia’s 30th PM and the sixth in the last 11 years). Australian economy is no stranger to leadership changes and tends to be resilient to such political uncertainty. This is because we have now had 10 years of changing Prime Ministers with no Prime Minister serving a full term since John Howard from 2004 to 2007. The question is no longer who will be Prime Minister for the next six months but more importantly who will be in the top job after the next election (due before 18th May 2019). At the margin, Morrison is perceived as less likely than Peter Dutton to lose the next election.
The minutes from the RBA’s latest board meeting were released last week with no real surprises (as expected). The RBA once again repeated the message that the next move in interest rates will probably be up, but that “there was no strong case for a near-term adjustment”. They added that recent data on wages and the labour market had “provide more comfort that household income growth would continue to increase gradually and support the outlook for consumption”. This month’s minutes also added a piece on global risks, referring to the adverse effects of trade tariffs being offset by Trump’s fiscal stimulus.
A steadily weakening housing market, persistently low inflation, benign wages growth and a slowdown in the global economy should see the RBA hold off on any move in the cash rate until late 2019.xt year.