RBA Monitor : Slow Transition In Economy Calls For A Dovish Policy

Summary The Reserve Bank of Australia (RBA) is anticipated to keep the cash rate at 1.50% at the September meeting. While the economic momentum has been positive, the transition away from the mining sector is still at an early stage. Business investments are gradually bottoming out and the slack in the labor market remains large. With a subdued wage growth, a pre-emptive rate hike is likely to hurt private consumption through larger mortgage payments with housing debt reaching a record high level. As inflation remains low, the Reserve Bank can afford a weaker Aussie which could further support the transition, by keeping the monetary policy accommodative.