The March board meeting of the RBA is historically not one of the four months of the year in which the likelihood of a rate change is highest. February, May, August and November happen to be the four months of the year in which previous rate changes have typically occurred.
As expected, the RBA announced Australia’s overnight cash rate would remain at 1.50%. The RBA Governor had pointed out in his February testimony before the House of Representatives Standing Committee on Economics the Reserve Bank “does not see a strong case for a near-term adjustment of monetary policy.”
However, there was a couple of points of interest to come out of the statement which followed the meeting. Several economist, including Westpac chief economist Bill Evans, observed what appears to be lowering of the RBA’s growth forecasts. He pointed to the RBA’s forecast “for the Australian economy to grow faster in 2018 than it did in 2017” and noted this was different from February’s Statement on Monetary Policy forecast of 3.25% in 2018 and 2019. He said the difference “can be interpreted as the Bank now feeling comfortable with growth being above 2.5%, which is a major qualification of the Bank’s previous growth outlook.”
The other point of interest was the RBA’s forecast of an end to slow wage growth. “Notwithstanding the improving labour market, wage growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wage growth over time. Consistent with this, the rate of wage growth appears to have troughed…” Evans’ interpreted this statement as evidence the RBA is more confident in its outlook. “This is an upgrade from the wages commentary in previous statements.”