The publication of the minutes of the RBA’s August meeting was a fairly innocuous affair and they did not cause the same ruckus as the publication of the July minutes. Unlike a month ago, bond yields moved just a little higher while the local currency was a little lower. That is not to say these minutes did not contain any important hints about RBA thinking but at least they did not provoke such a strong reaction as in July.
There were the standard areas of RBA interest; global economic conditions, which had continued to improve, especially in China and the local outlook, which was little changed from a month before. Local GDP growth was expected to be around 3% and inflation was expected to increase “gradually”. There was also the obligatory reference to the effect of a stronger local currency which would “result in a slower pick-up in inflation and economic activity than currently forecast.” All fairly usual stuff.
Then there were the changes from the previous minutes. These are what most economists and observers are interested in. ANZ senior economist David Plank thought there were two issues which were worthy of comment. The first was the concern the RBA regarding the level of household debt. The reference to “the risks associated with high household debt in a low-inflation environment” in the last paragraph is a measure of its importance in the RBA’s thinking. The second was its concern regarding “relatively strong” housing price growth in Melbourne and Sydney and a lack of progress in slowing price growth in these two markets.