AUSTRALIAN ECONOMIC DEVELOPMENTS
This week the Reserve Bank of Australia (RBA) left the cash rate at a record low of 1.50%. The RBA expects inflation and wages to accelerate gradually from here, as spare capacity in the labour market is absorbed (that is, as unemployment and underemployment fall). In its November Statement on Monetary Policy(released this week), the RBA noted that the economy is performing stronger than expected. As a result, the RBA’s forecast for GDP growth has been revised higher and the unemployment rate forecast has been revised lower from its last quarterly assessment in August.
The ABS ‘cost of living’ indexes released this week provide useful supplementary detail to the Consumer Price Index (see our Economics Weekly 2 Nov2018). The cost of living for employee households rose by 2.0% p.a. in the September quarter (Q3) of 2018. This was a deceleration from the June quarter (Q2) of 2018, largely because of changes to the Child Care Subsidy in July 2018 which caused out of pocket child care prices to fall in Q3.
Elsewhere in the economy, Ai Group’s monthly business surveys suggest slowing and diverging business conditions in October. The Australian PMI (released last week) and the Australian PSI slowed in October but are still indicating expansion. The Ai-Group/HIA Australian PCI declined by 2.9 points to 46.4 points in October (seasonally adjusted). This marked the industry’s second consecutive month of decline after 19 months of growth.
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