By Michael Witts

What was discussed at today’s RBA meeting? Were there any major differences compared with its December statement?

While the wording was different, the sentiments expressed in the statement released following the meeting were generally consistent with previous months.

While leaving the cash rate at 1.5%, the RBA noted that on a global basis there is no longer an expectation of further monetary easing in other major economies. Against this background, it is unlikely the RBA would be keen to move the cash rate lower in the absence of a significant adverse development in either global or domestic factors. Given the heightened geo-political risks that currently exist, this risk cannot be ignored.

What is the RBA’s view on Australia’s economy and the global economy in 2017? Is this different to ING Direct’s view?

The RBA was reasonably upbeat about both the global economy, with above-trend growth expected, and the domestic economy, with growth of around 3% over the next couple of years in the central scenario. We would share this view.

It is important to note that the increased production from the resources sector is beginning to flow sharply into higher value of exports - this is contributing to a sharp lift in national income. This is also reflecting in the surplus on the trade account over the two months.

What are the RBA’s main concerns?

The RBA again cited the positive impact of the lower AUD over recent years, especially in the services and education sectors. However the RBA warned that a further sustained increase in the exchange rate would complicate this contribution.

Although overall employment markets in aggregate appear to be satisfactory, the RBA noted that there was considerable variation in labour market conditions between states and across regions.

What is the RBA’s view on the property market? Are they concerned about apartment oversupply issues?

The RBA made similar observations in relation to the property market with activity varying considerably around the country. Based on the RBA analysis, it appears that investors have returned to the market with renewed interest following a pause over the second half of 2016. The RBA suggests that as leverage is increasing and household debt-to-income ratios accelerate, further supervisory action may be required. Equally, lenders have begun to apply further differential pricing towards the investor segment.

The looming over-supply of apartments on the eastern seaboard is again highlighted by the RBA. It is noteworthy that they do not draw any pricing conclusions from this development, however it is clearly a key watch point.

Can we expect any rate cuts/rises in 2017?

It appears now very clear that the RBA will be on hold for the balance of 2017.

The caveat to this would be adverse developments on the global stage that have a knock-on effect to the domestic economy. The increasing range of potential geo-political hot spots around the world could ignite an adverse economic outcome.