Below trend growth to continue
This week in Australia is of course all about the RBA Board meeting on Tuesday and the November Statement of Monetary Policy on Friday. Our special focus this week is on a number of charts showing that the RBA has already eased pro-cyclically and the non-mining economy is improving.
This week in Australia is of course all about the RBA Board meeting on Tuesday and the November Statement of Monetary Policy on Friday. Our special focus this week is on a number of charts showing that the RBA has already eased pro-cyclically and the non-mining economy is improving albeit restrained by mining. Nominal non-mining GDP growth is now nearing its long-run average, while unemployment in the two youngest age cohorts has begun to improve, although relatively slowly. Further easing by the RBA currently would have to be under the auspices of trying to see a quicker fall in unemployment, but this would likely mean a further boost to house prices. NAB expects the RBA to continue to hold interest rates at 2% pending further monitoring of developments in the domestic economy.
The week kicks off with Building Approvals, which are expected to show a modest rebound after last month’s fall. Medium-term, we see rates of approvals of multi-dwellings needing to slow from their current pace to avoid potential oversupply, particularly in apartments, given slowing population growth. The RBA will no doubt weigh the very low Q3 inflation reading and hikes in mortgage rates by major banks against signs of stronger performance in the economy of late. There doesn’t seem to be a strong case to ease monetary policy further at the present time, which suggests no change to rates notwithstanding the aforementioned developments.
In other Australian news, we are expecting another strong rise in retail sales (+0.7% m/m) given positive anecdotes from retailers, a strong NAB online retail sales release for September and the launch of the iPhone 6s (the previous iPhone release contributed to very strong retail sales in September last year). The week rounds out with a speech by the Governor on Thursday morning (9.25am AEDT), where there will be no doubt opportunity to explain the Bank’s decision tomorrow and the November Statement of Monetary Policy on Friday, which will give much greater detail on the Bank’s forecasts for growth and inflation in the period ahead along with the assessment of recent more encouraging trends for job advertising and business conditions.
For full analysis, download report:
For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets
© National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686.