Australia central bank used its Statement on Monetary Policyto flesh out its consistent recent view of accelerating growth and sluggish inflation, suggesting interest rates will stay at a record-low 1.5 percent.
Inflation held down by low wage growth, retail competition and spare capacity in labor market despite recent strong hiring; annual core inflation will only reach 2% in 2019.
Quarterly GDP growth to ease slightly in third quarter, then to average about 3% over next couple of years, led by resource exports and more positive business investment.
Household consumption likely slowed in third quarter after weak retail data; weak income growth and high debt levels are constraints.
Labor market conditions have “strengthened considerably” and forward indicators suggest “above-average employment growth” will continue.
The RBA looked at the implications of CPI weights going out of date: “the bank estimates that substitution bias had reached around 0.4 percentage points for year-ended CPI inflation to the September quarter 2017.”
Source : Bloomberg