RBA: Will the tightening stance of financial policy change further?
2024-12-09
■ Australia's real GDP grew in the third quarter, supported by government spending, but household consumption remained sluggish
■ The board of governors on the 10th is expected to keep the policy rate unchanged, but early expectations of a rate cut have emerged, and the statement has attracted much attention
On December 4, the Australian Bureau of Statistics announced that real GDP for July-September 2023 increased by 0.3% month-on-month, achieving positive growth for 12 consecutive quarters. Despite the increase in government spending, such as electricity and gas subsidies and the third round of income tax cuts (implemented in July), household consumption, which accounts for more than 50% of GDP, remains sluggish. In addition, the wage price index (WPI) in July-September increased by 3.5% year-on-year, showing a slowdown from the peak in October-December 2023 (up 4.3% year-on-year). However, the growth rate of WPI is still higher than the year-on-year growth rate of the consumer price index (CPI) in the same period (2.8%), and real wages have maintained positive growth for three consecutive quarters.
Retail sales in October, announced on December 2, increased by 0.6% month-on-month, achieving positive growth for three consecutive months, indicating that household consumption remains strong. The unemployment rate in October, which was previously announced, was 4.1%. Although it has been rising since the low point of 3.4% in November 2022, it remains at a historical low; the labor force participation rate was 67.1%, only 0.1 percentage points lower than the historical high in the previous month. The revised average CPI, a core inflation indicator, rose by 3.5% year-on-year, still higher than the central bank's target range (2-3%); service prices, which reflect wage growth, rose by 4.6% year-on-year, showing a high and stable trend.
Considering all the above factors, the Reserve Bank of Australia (RBA) will likely maintain the policy interest rate at 4.35% at the board meeting on the 10th. It is worth noting that the content of the statement and the speech of RBA Governor Bullock. In the minutes of the November board meeting, it was mentioned: "Be prepared to adjust policies according to the progress of the economic outlook" and "If consumption continues to be significantly weaker than expected and may significantly reduce the inflation rate, then a rate cut will be reasonable." The November employment data to be released on the 12th will become an essential basis for judging the resilience of the labor market and also provide a reference for the policy direction in 2025 and beyond.
■ The board of governors on the 10th is expected to keep the policy rate unchanged, but early expectations of a rate cut have emerged, and the statement has attracted much attention
On December 4, the Australian Bureau of Statistics announced that real GDP for July-September 2023 increased by 0.3% month-on-month, achieving positive growth for 12 consecutive quarters. Despite the increase in government spending, such as electricity and gas subsidies and the third round of income tax cuts (implemented in July), household consumption, which accounts for more than 50% of GDP, remains sluggish. In addition, the wage price index (WPI) in July-September increased by 3.5% year-on-year, showing a slowdown from the peak in October-December 2023 (up 4.3% year-on-year). However, the growth rate of WPI is still higher than the year-on-year growth rate of the consumer price index (CPI) in the same period (2.8%), and real wages have maintained positive growth for three consecutive quarters.
Retail sales in October, announced on December 2, increased by 0.6% month-on-month, achieving positive growth for three consecutive months, indicating that household consumption remains strong. The unemployment rate in October, which was previously announced, was 4.1%. Although it has been rising since the low point of 3.4% in November 2022, it remains at a historical low; the labor force participation rate was 67.1%, only 0.1 percentage points lower than the historical high in the previous month. The revised average CPI, a core inflation indicator, rose by 3.5% year-on-year, still higher than the central bank's target range (2-3%); service prices, which reflect wage growth, rose by 4.6% year-on-year, showing a high and stable trend.
Considering all the above factors, the Reserve Bank of Australia (RBA) will likely maintain the policy interest rate at 4.35% at the board meeting on the 10th. It is worth noting that the content of the statement and the speech of RBA Governor Bullock. In the minutes of the November board meeting, it was mentioned: "Be prepared to adjust policies according to the progress of the economic outlook" and "If consumption continues to be significantly weaker than expected and may significantly reduce the inflation rate, then a rate cut will be reasonable." The November employment data to be released on the 12th will become an essential basis for judging the resilience of the labor market and also provide a reference for the policy direction in 2025 and beyond.