RBA still cautiously optimistic – ANZ

FXStreet (Barcelona) - The speech of Chris Kent, Assistant Governor (Economic) at the RBA, revolved around the business cycle in Australia but he did lay out the Bank’s thinking on the road-map to recovery, says Felicity Emmett, Senior Economist at ANZ.

Key Quotes

“Kent once again highlighted the pick-up in non-mining activity, led by the housing sector. Growth in the non-mining sector is now running close to its historical average. The drag from the wind-back in mining investment is clearly providing a significant offset to this, and this drag will only intensify over the coming year or so.”

“Overall the RBA continues to look for below trend growth, but Kent today outlined the Banks thinking on how the recovery is expected to play out: it sees household spending picking up, with non-mining investment responding and then the labour market in turn improving.”

“In the Q&A session, Kent was asked about the possibility of FX intervention. Not surprisingly, he answered that the Bank would not rule it out. We don’t, however, see this as a strong possibility. The Bank has previously highlighted that that the successful intervention occurs when market dysfunction has removed liquidity or when valuation is at an extreme. We are not at this point now.”