Earlier in the week we got the RBA monetary policy decision and statement along with a speech from Governor Lowe
- RBA attempts to mix things up by tweaking inflation outlook
- RBA leaves cash rate unchanged at 1.50%
- RBA's Lowe: Escalation of trade war could be damaging for the global economy
Today is the quarterly SoMP
Due at 0130 GMT
ANZ have a great preview, these the main points:
RBA is expected to keep forecasts unchanged
The economy seems to be evolving broadly as the RBA expects,
global outlook seems a touch more vulnerable
- global economy is solid, the RBA has recently noted that "some of the downside risks to the global growth outlook had increased" with one uncertainty being "the direction of international trade policy in the United States". With trade tension intensifying, the risks of an escalating trade war and the potential knock to Australia's growth are likely to be front of mind for the RBA.
We expect the RBA to leave the inflation profile unchanged, although the risks to those forecasts have tilted to the downside following the soft detail of the Q2 CPI.
- Broadly though, we think the RBA is likely to be fairly confident that spare capacity in the economy is gradually eroding and that inflation will eventually move closer to the midpoint of the target band.
- The Bank is then likely to retain the oft-stated conclusion to its monthly statements that "further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual."
On the domestic front, we think that the economy is behaving broadly as the RBA forecast in May, so we anticipate no changes to its forecasts for growth, inflation or unemployment.
- recent data are broadly consistent with the RBA's central forecast for GDP growth to "average a bit above 3 per cent in 2018 and 2019".
- consumer sector has been relatively solid, with consumer confidence and retail sales holding up well despite the weakness in house prices.
- RBA's outlook for housing construction is likely to be little changed
- One area where the RBA may be less upbeat is the outlook for non-mining business investment
- The export outlook is positive
- Employment growth has slowed from the frantic pace of 2017, but remains solid
Wage growth is likely to remain a key focus for the RBA.
- The 0.5% q/q rise in both the WPI and the GDP measure of wages in Q1 were likely in line with the Bank's expectations. However the strength in the WPI including bonuses measure and the lift in the wage growth in EBAs would be encouraging. The RBA will be closely watching the next read on the WPI on 15 August. This stands out as perhaps the most important domestic economic release for August.