· As expected, the Reserve Bank of Australia has left cash rate target unchanged at 1.5% for the 10th consecutive period.
· Wording of today’s announcement is very much in line with the May statement. Overall, the RBA’s global outlook remains positive, however, reiterated that domestic growth and core inflation will increase gradually.
· The RBA expects GDP to have slowed in the March quarter, this is in line with our outlook, given the disappointing current account deficit data from earlier today (see below). The Central Bank did cite key indicators point towards continued growth in employment over the period ahead and acknowledged that employment growth has been strong in the past couple of months. However, subdued wage growth will restrain household consumption, and this would keep inflation low and monetary policy accommodative for the foreseeable future.
· The RBA acknowledged that the low level of interest rates and a relatively low AUD has assisted the country’s transition out of mining investment. A process that is almost complete.
· The RBA once again acknowledged high levels of household debt to income ratio, however, the Central Bank hopes recent supervisory measures and the additional supply of apartments in Eastern cities will help contain the risk associated with rising levels of debt