The minutes of the RBA’s June meeting were largely unchanged from those of the previous meeting in May which resulted in no change to official interest rates. As AMP Capital’s Shane Oliver put it, there was “nothing really new” in them. References to the labour market, house prices, household debt and wages were all highlighted as before. The acceleration of global growth was “continuing”.
Locally, “the transition to lower levels of mining investment following the mining investment boom was almost complete.” Forward-looking indicators of employment suggested “continued growth” and “a gradual erosion of the spare capacity in the labour market”.
Wage growth “was likely to remain” low for some time but wage growth and inflation “were expected to increase gradually” although there had been “isolated reports of localised and skills-specific labour shortages” forcing wages higher. However, on the whole, “low growth in incomes, along with high levels of household debt” were holding households back from spending.
There was one new area of interest. The RBA board referred to March quarter GDP/output growth several times; firstly as a blip on the path back to trend or above-trend growth and secondly, as one of the reasons for maintaining the current stance of monetary policy.
The RBA anticipated first quarter GDP figures would be weak (which they were) but it saw no need to lower the cash rate any further. Interest rates were already at a “low level” and monetary policy was already “accommodative”. However, the RBA is caught between a rock and a hard place as acknowledged near the end of the “Considerations for Monetary Policy” section.
“The Board continued to judge that developments in the labour and housing markets warranted careful monitoring.” The RBA is worried by the housing market, the level of household debt, wages, unemployment rates and how future household spending, or lack thereof, may feed into the economy. At the same time it appears to be hopeful the growth rate of the economy may rise back to trend levels and take care of some of its concerns.