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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, Commodities

It’s been just on a week since the RBA published the Quarterly Statement on Monetary Policy that contained the reduced growth forecasts for the remainder of 2014. The RBA is now implicitly assuming quarterly GDP growth of 0.5% for the June through to December quarters and to finish the year at 2½% annual growth. But another improvement in business confidence and stronger-than-expected house price growth last week suggest that the risks to the RBA’s forecasts may be to the upside.

Stronger house prices flow through and act as a stimulus to the business cycle, with businesses reporting the equal second highest confidence reading in over four years last week.

The RBA would be pleased to see both consumer and business confidence data improving in the last quarter, but with wages growth still soft it reinforces their “on-hold” monetary policy stance at the moment.

I don’t think this view is going to change any time soon.

Source: Rural Bank

 

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