The following responses were by ING’s Peter Casey. 

What did the Reserve Bank say in today’s meeting?

The RBA left the cash rate at 2.00% - it has been at this level since last May. 

There was no compelling reason for the RBA to move the cash rate today. There were some developments in the statement that was released. (see below)

Has anything in this month’s statement changed compared with last month’s statement?

They noted that commodity prices have recovered recently but this followed significant falls in previous quarters.

Financial markets have also settled down after a period of heightened volatility

Most importantly, the AUD has strengthened significantly and this could “complicate the adjustment under way in the economy”. In other words, the non-mining export sectors such as tourism will find it more difficult to compete internationally                      

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

Generally they seem to remain reasonably positive. 

  • Unemployment is lower than 6 months ago
  • Interest rates are low and therefore providing support to the economy. This can be sustained because inflation is low and expected to stay low

The banking supervisors, ASIC and APRA, are ensuring that lenders acting prudently so that the lower rates do not overly inflate housing prices 

And the global economy and the Aussie dollar?

The AUD is the main story. At just under 0.76, it is at its highest level since July last year and 0.07 above its low point in that period. This will cause some concern as it is making it harder for our exporters.

The global economy is growing but not as quickly as previously. This has led to other developments such as the ECB cutting rates and the Fed pausing in their rate hikes.

What is the RBA’s view on low inflation and outlook?

Inflation is low and likely to stay low

What is ING Direct’s view on the Australian economy, global economy and the Aussie dollar?

We think that the transition away from the mining-based economy will continue. If this stalls, especially if the AUD stays high, then the RBA may be tempted to look at cutting the cash rate.

The global picture is overall positive but each region is facing its challenges.

We are clearly very exposed to China and there will be volatility as their growth rate slows. However we believe that Australia is well-placed to capture increased demand from the growing middle class e.g education, tourism and food safety.