RBA minutes: Key Takeaways - ING

Rob Carnell, Chief International Economist at ING bank enlists key takeaways from the RBA May meeting minutes released last hour.

Key Takeaways:

“Following recent fiscal developments and the impact of stronger commodity prices on Australian terms of trade, there was little in the latest set of RBA minutes (May 2 meeting) to give financial markets cause to react.“

“Notably, there was no echoing of the concern RBA governor Lowe had expressed in a recent speech about the impact a stronger AUD might have on the growth outlook - the text merely noted the recent depreciation.”

“Two factors continue to concern the RBA - most notably, the housing market, which seems to have responded only marginally to tighter mortgage lending conditions imposed by the Australian Regulator APRA, and the labour market, which exhibited continued slack.”

“But otherwise, the main message seemed to be greater confidence that underlying inflation (currently between 1.5 and 1.9% depending on the measure), would return to 2.0% by early 2018 (target rate 2-3%).“

“There is little in the text to suggest any imminent change to RBA policy, in either direction. But the housing market may need watching further, and if the frothier regional housing markets show no signs of moderating in the near term, then APRA may have to tighten standards (especially on the housing investment market and interest only mortgages) again before too long.”