A difficult retail environment resulted in significant discounting, so lower prices for clothing, household appliances, tools and computing equipment are possible. A low CPI number obviously increases the odds on the Reserve Bank continuing to sit on the sidelines. |
Building approvals have been volatile, but with this bounce, and other data like housing credit, it does look like the housing sector is near bottom after a very mild downturn. |
Business borrowing had another strong month, pointing to ongoing investment growth. Investment again looks set to support economic growth this quarter. |
Clearly, exports are the disappointment. Signs that at long last the exports story was coming through, has pretty much disappeared with this release. |
Consumer caution persists and a weak housing sector remains a drag on overall services sector activity. |
Consumer caution was shaping up as the major domestic risk to the Australian economic outlook in 2006. Good labor market outcomes were always going to be the best antidote to this caution. |
It's confirmation the economy stepped down several gears in the second half of 2005. It is hard to be too pessimistic for the outlook for 2006, but it is one of those indicators that says there is no hurry to do anything on rates. |
It's on the side of the ledger for a tightening bias. But with uncertainty about global growth and oil prices, the bank isn't likely to move rates anytime soon. |
Policymaker's toleration for inflation risks must be lower when the inflation rate is bumping around 3% per annum, |
Signs of slowing growth and wages moving sideways rather than picking up, and of course the currency showing some signs of life, suggest that the Reserve Bank has probably administered enough monetary medicine for the time being. |
So we suspect that it won't take much to give the RBA that extra shove toward tightening. |
Some of the risks coming through in the labor market in Australia are still very tight and, ultimately, you would expect that to push up wages and then flow through to inflation. |
Strong employment keeps alive the risks to wage inflation and the central bank's concerns. |
The continued improvement in services-sector activity is particularly impressive given the head winds restraining the consumer-related sectors. |
The most likely outcome is that interest rates will rise. |