RBA looks on the bright side
The Reserve Bank has sounded a slightly more optimistic note on the outlook for the non-mining sectors of the economy, while continuing to express frustration about the "uncomfortably high" exchange rate.
The central bank kept the door open for further rate cuts in its December meeting minutes, but said it would remain on the sidelines while it monitored the "effects of the substantial degree of monetary policy stimulus that had already been put in place".
"There had been further signs of the stimulatory effects of low interest rates, most notably in the housing market, and additional effects were still likely to be coming through," the RBA's board members said in the minutes, published on Tuesday.
The Reserve Bank talked again on the need for the Australian dollar to fall further to obtained balanced economic growth.
Financial markets broadly looked through the latest attempt to talk down the local currency, with the dollar showing only a slight reaction in a narrow range.
The Australian dollar rose from the day's low of US89.29¢ to US89.59¢. It broadly shrugged off a further deterioration in the fiscal bottom line, as unveiled by federal Treasurer Joe Hockey in the midyear economic and fiscal outlook shortly after the minutes were released, slipping slightly to US89.32¢.
The currency was buying US89.47¢ in late trade.
Economists said the RBA's minutes were broadly in line with its recent comments on the economy, although it contained a slightly more positive assessment of some sectors.
"At the margin, we'd argue there are some microscopically more upbeat comments from the RBA in [the] minutes, largely around improved global data and domestic labour demand and consumption trends, but wouldn't overplay this," UBS chief economist Scott Haslem said.
The RBA said there were tentative signs of stabilisation in forward indicators for the labour market. It noted a small pick-up in household consumption, improving trends in retail sales and a strengthening of conditions in the housing market.
The Reserve Bank added that the national accounts, which were released in late November, did not factor in some non-resources industries that have been improving this financial year.
"[The] non-mining investment not covered by the survey was expected to show some growth over 2013-14, most notably in the health industry," the minutes said.
Even so, the RBA warned the capital expenditure survey, which showed a rise in mining investment this financial year, was a "less accurate guide" on future resources investment. The bank's liaison suggested that mining investment was likely to continue declining in the near term.
Financial markets have been waiting on speeches by two central bankers — RBA governor Glenn Stevens and US Federal Reserve chairman Ben Bernanke — for more updated overviews of the Australian and US economies respectively.
Mr Stevens' appearance at a House of Representatives' economics committee in Canberra on Wednesday could be the last chance for the governor to talk down the dollar.
His comments on Friday to The Australian Financial Review, which included a preference for the currency to be closer to US85¢ rather than US95¢, saw the dollar fall below US90¢ — a level it has held so far.
Mr Bernanke's speech, which takes place early on Thursday morning AEST, follows the Fed's December meeting. Financial markets have been lifting expectations the meeting could herald a start to the wind-back of its bond-buying program.