The minutes of the December board meeting were released this week and once again they contained little in the way of surprises. Most of the statements made were repeats of the ones made in the November minutes; East Asian economies were generally weak (Japan) or weakening (China) while European economies were continuing to recovery and US domestic demand was strengthening; very low interest rates were supporting growth in Australian household consumption and dwelling investment; the exchange rate was adjusting to declines in key commodity prices and boosting demand for domestic production; the spare capacity in the domestic economy which was a function of the relatively high unemployment rate, low wage growth and the lower-than-expected inflation rate.
There were some changes however. Some references to lower-than-expected inflation and spare capacity lasting for some time has been replaced by a more optimistic reference to improvements in non-mining sectors, stronger employment growth and a stable unemployment rate. The other noticeable change was in the November reference to increased credit growth being replaced by a reference to the easing of investor loan growth and how house price rises has moderated or been subdued.
The December minutes were overshadowed by the Federal Government’s Mid-Year Economic and Fiscal Outlook (MYEFO) papers which was released a little later in the day but Justin Fabo of the ANZ described the minutes as “pretty positive” while Westpac’s Bill Evans described them as “a little more upbeat on the economy than we saw in November.”