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Weekly Economic Commentary

Weekly Economic Commentary

Categories: General, General

Financial markets continued their spectacular march higher last week, particularly the US stock market with the Dow Jones notching up its best record breaking streak in thirty years (i.e. ten consecutive days of record highs). This achievement is all the more surprising given the growing concerns that Donald Trump will not be able to deliver his many election promises.

Locally, Philip Lowe made his maiden appearance as RBA Governor to the House of Representatives Standing Committee on Economics last week where his prepared remarks were uncontroversial, largely repeating the main themes from the recent February Statement on Monetary Policy. In the following question time Dr Lowe said some RBA staff had argued for lower monetary policy (lower cash rate) to reduce the unemployment rate. He suggested further cuts could create more fragility in the economy pushing already high household debt to “dangerous” levels. The trade-off of a slightly lower unemployment rate in the short-term wouldn’t be justified by the medium term downside risks to the national economy of higher household leverage.

The key out-take from RBA commentary last week, including an earlier speech by the RBA Governor and the release of the February Board meeting minutes, is that the “hurdle” for further rate cuts appears to have risen.

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Source: Rural Bank


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