Reserve Bank ‘uncertainty’ about economy

An unsure RBA says it will look to inflation data next week to assess better the nation’s economic outlook.

“Considerable uncertainty” remains about momentum in the labour and housing markets, the RBA says.

The Reserve Bank of Australia says it’s uncertain about conditions in the economy and will look to inflation data next week to assess better the outlook.

Interest rates were left on hold at the Reserve Bank of Australia’s board meeting on October 4, with minutes showing policy makers want to see if two prior rate cuts this year are having any impact on lifting inflation.

“Members noted that data on CPI inflation for the September quarter and an update of the forecasts would be available at the next meeting,” the minutes said.

“This would provide an opportunity to consider the economic outlook, assess the effects of the previous reductions in the cash rate and review conditions in the labour market and housing markets,” the minutes added.

The comments will heighten interest in the consumer price index data. A weak inflation number in the third quarter could fan talk of further interest rate cuts. The RBA board next meets on November 1.

The RBA’s benchmark cash rate currently sits at a record low of 1.50 per cent. Inflation is currently forecast to remain below the RBA’s 2-3 per cent target band for a few years yet.

“There remained considerable uncertainty about momentum in the labour market and housing markets,” the minutes said.

Australia’s jobless rate has been falling, but job creation is biased toward part-time jobs and measures of labour market slack remain elevated, the minutes said.

In the housing market, some cities like Sydney are showing solid house price growth, while other cities are showing weakness. The RBA has concerns around the level of risk associated with the housing market as prices have soared over recent years and mortgage debt is at record levels.