What do the Minutes reveal?

• “Overall, recent data suggested that interest-sensitive parts of the economy were responding to the historically low levels of lending rates and it remained likely that this had further to run. At the same time, the factors weighing on the economy – including the high exchange rate, the waning growth of mining investment, and fiscal consolidation – were likely to persist. The key issues were what the balance of these factors would turn out to be.”
• “With growth forecast to be a little below trend in 2013, and inflation close to target, members judged that it was appropriate for the stance of policy to be accommodative. The outlook for inflation, as currently assessed, would provide scope for further easing should that be necessary to support demand. At this meeting, the Board’s judgement remained that, on the information currently to hand, the most prudent course was to hold rates steady and to continue to assess developments over the period ahead.”
• Job market mixed: “Firms in some industries had shown a willingness to add to their workforce – including in the construction industry – and recent labour market data had been mixed.”
• Housing outlook: “Over the past few months, housing loan approvals had picked up for both owner-occupiers and investors, and stronger conditions in the established housing market more generally were expected to support moderate growth of dwelling investment this year.”
• Stronger consumption: “Recent indicators suggested that growth of consumption had increased over recent months after a softer December quarter. The value of retail sales picked up strongly in January and the Bank’s liaison pointed to further growth in February and March.”
• Investment insights: “Information from the Bank’s liaison indicated some willingness on the part of firms outside the mining sector to increase investment spending, especially on information technology assets and systems.”

What is the importance of the economic data?
The Reserve Bank releases minutes of the monthly Board meeting a fortnight after the event. The minutes provide insight into central bank thinking on rate settings.

What does it all mean?

• The Reserve Bank couldn’t say it any better. Interest rate settings are on hold. If rates were to move in any direction it is more likely to be down. But the RBA isn’t laying the groundwork for a major easing of monetary policy. To the contrary – the RBA believes that low rates are working to boost growth.
• The Reserve Bank has plenty of ammunition to use to boost growth if it needs to with the cash rate at 3 per cent and inflation expected to be in the target band.
• CommSec expects the Reserve Bank to stay on the interest rate sidelines.

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