Garry Shilson-Josling, AAP Economist
(Australian Associated Press)
The Reserve Bank not only left the cash rate at a record low of 2.0 per cent, it said so with a statement almost identical to the previous month’s.
Almost, but not quite.
It’s never quite clear with central banks whether minor changes to the wording of regular statements carry significant meaning, or are just work done to confirm its staff actually turned up for work that day.
In this case, the changes between the September and October announcements affect only three of the 21 sentences in the statement issued by RBA Governor Glenn Stevens after the bank’s board meeting.
But they do suggest some evolution in the way the RBA sees the world.
The first difference was in the commentary about the state of the Australian economy.
SEPTEMBER: “In Australia, most of the available information suggests that moderate expansion in the economy continues.”
OCTOBER: “In Australia, the available information suggests that moderate expansion in the economy continues.”
The deletion of the phrase “most of” suggests the RBA is a little more confident that the economy is chugging along nicely.
The second difference came in the discussion of the the world’s financial markets.
SEPTEMBER: “Equity markets have been considerably more volatile of late, associated with developments in China, though other financial markets have been relatively stable.”
OCTOBER: “Equity market volatility has continued, but the functioning of financial markets generally has not, to date, been impaired.”
The change broadens the concern about instability – it’s no longer just China – and flags the possibility that markets might at some stage become “impaired”.
The third change related to the housing market.
SEPTEMBER: “Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The bank is working with other regulators to assess and contain risks that may arise from the housing market.”
OCTOBER: “Dwelling prices continue to rise strongly in Sydney and Melbourne, though trends have been more varied in a number of other cities. Regulatory measures are helping to contain risks that may arise from the housing market.”
So the boom has spread to include Sydney and Melbourne, but efforts to dampen investor activity by the Australian Prudential Regulation Authority, the Foreign Investment Review Board and the Australian Tax Office are kicking in.
In short, the RBA seems a tad more confident in the state of the economy, a little more worried about international financial markets, and more confident that interest rate rises won’t be needed to rein it booming house prices.
The RBA seems as firmly ensconced on the cash rate sidelines as it was a month ago.