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  • Nigel Douglas

RBA has relatively positive outlook

On Friday 4th August, 2017, the Reserve Bank of Australia (RBA) released its' regular Statement on Monetary Policy (SMP) which provides detailed economic forecasts with supporting analysis. This SMP was relatively upbeat, with the Bank projecting that growth will pick up to over 3% (from 1.75%) and headline inflation will move back into the 2% to 3% target band (from 1.9%) in the period to December 2019 . However, the unemployment rate will be broadly stable (currently at 5.6%) in the 5% to 6% range with a bias to 'edging lower' given the high degree of underemployment and other structural factors.

The RBA August MPS is available at: http://www.rba.gov.au/publications/smp/2017/aug/

Necessarily, RBA forecasts are subject to technical assumptions on interest rates and the exchange rate so this can explain some differences with private sector market economist views. Note that in this MPS, the RBA forecasts a fall in the terms of trade so the outlook incorporates a successful transition from the mining boom whilst avoiding an implosion of house prices. Higher public infrastructure spending is likely to be a significant positive factor. The RBA also expressed concern about the near term strength of the Australian dollar and the negative impact on growth and inflation if it is sustained. However, media reports suggest that market economists generally expect a rebound in the US dollar will help to depress the Australian dollar later this calendar year.


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