By Michael Witts

What was discussed at yesterday's RBA meeting? Were there any major differences compared with its last statement? Any major concerns?

The RBA Board again left the cash rate unchanged at 1.5%. The tone from the meeting was consistent with recent previous meetings; namely the transition in the economy continues and the shift towards non-mining investment is gathering momentum.

The RBA flagged that the GDP data to be released today will likely be at the lower end of expectations; this outcome has been strengthened by net export data, which was weaker than expected, together with a build-up of inventories.

Equally, the RBA appears confident to look through the quarterly GDP data prints as they focus towards a stronger growth picture in 2018.

The RBA suggests that recent supervisory measures are beginning to help address the risks associated with high and rising levels of indebtedness. The RBA notes that lenders have also announced increases in mortgage rates, particularly those paid by investors and on interest-only loans.

What is the RBA’s view on the Australian dollar?

The RBA reiterated their previous comments that the depreciation of the AUD over recent years has been positive in assisting in the transition of the economy. Rightfully, they have indicated that an appreciation of the AUD from around current levels would unwind some of these positive effects. 

Did the RBA make any comment on the Budget and effects on the economy?

It would be unusual for the RBA to comment explicitly on the Budget. The Bank suggested that the economy will grow by around 3% in 2018/19, which is very much in line with the forecasts provided by Treasury when the Budget was released.

What is ING Direct’s view on the economy and expectations for national accounts data?

From the partial indicators that have been released, it appears likely that the quarterly GDP data will be a slight positive (0.1/0.2%), for annual growth of around 1.5%. This outcome was weather impacted due to the heavy rains along the east coast during March, and the June quarter will be impacted by Cyclone Debbie.

The services sectors, including tourism and education, appear to be solid.

The challenge for the RBA and APRA will be to manage the orderly slowdown in the housing market without adverse impacts on the broader economy and consumer sentiment in particular. At this stage, we see this risk as being manageable.

The key indicators to watch are those related to the labour market, in particular job growth, or the lack thereof. Any weakness in the labour market could well translate to increased mortgage arrears.

Broadly, we believe the economy will successfully transition to the expected higher growth plan as suggested by both RBA and Treasury forecasts.