Asia-Pacific: The Week Ahead (Feb 18-22); Shifts In The Land Down Under

By Steven Levine, Senior Market Analyst, Interactive Brokers

Activity on the Asia-Pacific calendar will continue to gather momentum in the week ahead, with several updates on Australia’s economic health, including its manufacturing and employment situations.

Monday, February 18

Reserve Bank of Australia’s (RBA) Meeting Minutes

The RBA at its monetary policy meeting earlier in February elected to keep the cash rate at 1.5%, where it’s been since August 2016.

RBA governor Philip Lowe noted that Australia’s economy is set to grow by around 3% in 2019 and by a little less than that figure in 2020, mainly due to slower growth in exports of resources. The growth outlook, he said, is being supported by rising business investment and higher levels of spending on public infrastructure.

However, Lowe also observed that “some downside risks have increased,” including weaker-than-expected GDP growth in the September quarter on the back of a deceleration in household consumption and income. Lowe added that the main domestic uncertainty continues to concern the outlook for household spending and the effect of falling housing prices in some cities such as Sydney and Melbourne.

At its recent meetings, the central bank said it has paid special attention to developments in the nation’s housing market, as well as how lower prices may impact construction activity and households’ spending decisions. The RBA has also considered how the prospects for consumption growth would be affected if household income growth does not accelerate.

(Click on image to enlarge)

The RBA concluded that in light of recent data, as well as inherent outlook uncertainties, rate-setting risks have “shifted to be more evenly balanced,” compared to the previous tightening policy bias the bank had held. The Board said it does not see “a strong case to adjust the cash rate in the near term” and will maintain its medium-term focus.

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The author does not hold any positions in the financial instruments referenced in the materials provided.

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