This from Westpac's Chief Economist Bill Evans; he concludes:

  • These minutes contained a few more surprises than we had originally expected - a clear lift in confidence around the labour market but a stronger emphasis on the risks associated with household debt.
  • The extensive discussion around inflation also implies less certainty around the current view that inflation will lift through 2018 and 2019.
  • Key to much of this discussion is around wages growth. This will impact incomes and potential household debt ratios; inflation conditions; and the capacity of the household sector to lift its spending, thereby signalling a better environment for businesses and lifting employment and investment.
  • Given the evidence overseas, for countries with less spare capacity in their labour markets than Australia, we are much more cautious about the wages outlook and therefore expect that the case for higher rates next year will gradually fade.

Also, Evans on the AUD remarks in the minutes:

  • Sensibly, the Bank has not tried to "jawbone" the Australian Dollar. That can only be effective if the market believes that the Bank is prepared to take some action. Given concerns around household balance sheets and a well-known reluctance to intervene, markets are totally confident that the Bank will not take any action to deal with the high Australian Dollar.
  • We saw in the Statement on Monetary Policy that despite the 3% appreciation in the TWI between May and August, the Bank chose not to adjust its growth and inflation forecasts in 2018 and 2019. However, it now specifically states in the minutes "a further appreciation of the exchange rate would be respected to result in a slower pick-up in inflation and economic activity than currently forecast".
  • It is our view that the AUD will drift back down to USD 0.76 by the time of the next forecast review (November), so the AUD will not represent a risk to the forecasts. On the other hand, if we are wrong, we should take this comment on face value and expect an even lower forecast for inflation and economic activity.