The Reserve Bank has a largely positive view of the Australian and global economy, according to the minutes of this month’s monetary policy meeting.
Board members weighed up a variety of domestic and international factors when deciding to leave the official cash rate at a record-low 1.50 per cent, the minutes have revealed.
The domestic considerations included:
- Unemployment is at its lowest level in four years
- Low interest rates have been supporting the Australian economy
- Growth in household credit has slowed, but still requires careful monitoring
- Wage growth is low, but is expected to pick up over time
- Australia’s terms of trade are expected to decline, but remain relatively high
The international considerations included:
- Conditions in the global economy have improved over 2017
- Forecasts for future growth have also improved
- Unemployment has fallen to low levels in America, Japan and Germany
- China’s economy grew faster than expected over the first three quarters of 2017
- US interest rates are likely to increase
Unemployment expected to keep falling
The minutes also revealed that board members discussed how Australia’s unemployment rate had fallen and inflation had moved closer to its 2-3 per cent target.
“Members noted that this had occurred at the same time as risks in household balance sheets had lessened. Recent data had increased confidence that there would be further progress on these fronts over the following year,” according to the minutes.
“How far and when stronger conditions in the economy and labour market might feed through into higher wage growth and inflation remained important considerations shaping the outlook.
“Taking account of the available information, the board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”