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Reserve Bank interest rates: RBA board meets to decide on borrowing costs – live | Reserve Bank interest rates: RBA board meets to decide on borrowing costs – live |
(32 minutes later) | |
Bank governor Philip Lowe last month gave a very strong steer that the board would cut this time. In a speech he said that unemployment would not go down with cutting rates and said that “we will consider the case for lower interest rates”. | |
So far pretty clear cut. | |
But an article in the Australian Financial Review yesterday set out three possible reasons why the bank might sit tight again today. If you didn’t see the piece, allow me to summarise for you. The first reason is that the bank might think that if it cuts rates it will have no ammunition left to stimulate the economy if it tipsm into recession, which some think is possible later this year. Number two is that unemployment is still not rising high enough to justify a cut; the bank has consistently said that the jobs market has to weaken more in order to justify cuts. The final reason is that the RBA might think that with the Coalition back in power, its tax cuts will provide stimulus enough for the economy. | |
Stock markets have been tumbling again across the rest of Asia Pacific as the US-China trade/tech/geopilitical standoff continues to rumble on without much propsect of a resolution. | |
The Nikkei is down 0.6%, Hang Seng is off 0.65%, Shanghai -1% and the Kospi in Seoul is just into the red by a couple of points. | |
It followed a volatile session on Wall Street which saw the stocks fall on weak factory data. But the Nasdaq dropped by 1.61% to 7,333.02, taking it more than 10% lower than its May 3 closing record, amid concerns that US regulators could target Alphabet, Facebook and Amazon for antitrust violations. | |
Read the full report hewre: | |
US tech stocks slide as Google, Facebook and Apple fear antitrust investigations | |
While the Aussie dollar dipped slightly after those retail figures, the ASX200 has remained flat as investors sit on their hands ahead of the decision at 2.30. The index is up 1.7 points, o.03%, at 6,322. | While the Aussie dollar dipped slightly after those retail figures, the ASX200 has remained flat as investors sit on their hands ahead of the decision at 2.30. The index is up 1.7 points, o.03%, at 6,322. |
Writing yesterday before the retail figures, Craig James, chief economist at Commsec Research, said there had been a lot to like about recent economic data. Company profits are at a record high, he says ,sales are growing near the fastest pace in a decade in 12 out of 15 industry sectors and wages are growing at a faster pace than the decade average. | Writing yesterday before the retail figures, Craig James, chief economist at Commsec Research, said there had been a lot to like about recent economic data. Company profits are at a record high, he says ,sales are growing near the fastest pace in a decade in 12 out of 15 industry sectors and wages are growing at a faster pace than the decade average. |
With inflation low, he says the figures mean the RBA can “go for growth” by cutting rates and trying to get more people into work. | With inflation low, he says the figures mean the RBA can “go for growth” by cutting rates and trying to get more people into work. |
Worth highlighting a chart from Greg Jericho’s aforementioned article showing that profits have been rising but wages haven’t kept up: | Worth highlighting a chart from Greg Jericho’s aforementioned article showing that profits have been rising but wages haven’t kept up: |
The chances of a cut looked even more likely after this morning’s weak retail sales figures. | The chances of a cut looked even more likely after this morning’s weak retail sales figures. |
The release from the Australian Bureau of Statistics said that retail sales fell 0.1% in April, compared with growth of 0.2% predicted by economists. | The release from the Australian Bureau of Statistics said that retail sales fell 0.1% in April, compared with growth of 0.2% predicted by economists. |
Spending on household goods fell by 0.9%, leading economists to make a direct read across to impact from the falling property market. Cafes, restaurant and takeaway food services fell 0.7%; and clothing, footwear and personal accessory retailing dropped by 1.2% for the month. The falls were offset by a 0.2% lift in food retail and a healthy 1.8% rise in department store spending. | Spending on household goods fell by 0.9%, leading economists to make a direct read across to impact from the falling property market. Cafes, restaurant and takeaway food services fell 0.7%; and clothing, footwear and personal accessory retailing dropped by 1.2% for the month. The falls were offset by a 0.2% lift in food retail and a healthy 1.8% rise in department store spending. |
April 2019 Retail sales in NSW is a tale of a dying property sector compared to April 2018April 2019 SAFurniture et al: -11% Electronics -3.5%Household goods -0.9%Recreation goods -10.9%Population QE has failed.But Department stores and Pharmaceuticals/cosmetics up up! | April 2019 Retail sales in NSW is a tale of a dying property sector compared to April 2018April 2019 SAFurniture et al: -11% Electronics -3.5%Household goods -0.9%Recreation goods -10.9%Population QE has failed.But Department stores and Pharmaceuticals/cosmetics up up! |
Once again, retail sales growth has dipped below 3%. Sector continues to struggle under the weight of low wage growth and falling property prices #ausbiz pic.twitter.com/RghkpYg7E9 | Once again, retail sales growth has dipped below 3%. Sector continues to struggle under the weight of low wage growth and falling property prices #ausbiz pic.twitter.com/RghkpYg7E9 |
The Australian dollar dipped slightly to US69.64c on the news at 11.30am although it has since moved up againto US69.73c. | The Australian dollar dipped slightly to US69.64c on the news at 11.30am although it has since moved up againto US69.73c. |
More or less everyone thinks today will be the day when the cash rate moves into yet more uncharted territory. All four of Australia’s big banks believe that rates will fall today – and probably fall again by the end of the year. The doyen of bank economists, Bill Evans, thinks today will see the first of three rate cuts this year. | More or less everyone thinks today will be the day when the cash rate moves into yet more uncharted territory. All four of Australia’s big banks believe that rates will fall today – and probably fall again by the end of the year. The doyen of bank economists, Bill Evans, thinks today will see the first of three rate cuts this year. |
JP Morgan goes further and sees the cash rate as low as 0.5% sometime next year. | JP Morgan goes further and sees the cash rate as low as 0.5% sometime next year. |
So its #RBA day & 25bps is locked & loaded. So the better qn is - could it be a one done all done day? Here is the interbank's pricing of -50bps - for a cash rate of 1%. #ausbiz #neversaynever pic.twitter.com/zlUOwKru4t | So its #RBA day & 25bps is locked & loaded. So the better qn is - could it be a one done all done day? Here is the interbank's pricing of -50bps - for a cash rate of 1%. #ausbiz #neversaynever pic.twitter.com/zlUOwKru4t |
Westpac’s Matthew Hassan believes a cut is nailed on so focuses on what a reduction in borrowing costs might mean for economic sentiment. He thinks it’s going to be “reasonably positive” and, because it is likely to be the first of several more cuts this year, “the more interesting aspect may be the extent to which a June rate cut and follow up moves in coming months generate a more sustained lift in housing related sentiment”. | Westpac’s Matthew Hassan believes a cut is nailed on so focuses on what a reduction in borrowing costs might mean for economic sentiment. He thinks it’s going to be “reasonably positive” and, because it is likely to be the first of several more cuts this year, “the more interesting aspect may be the extent to which a June rate cut and follow up moves in coming months generate a more sustained lift in housing related sentiment”. |
Welcome to the live blog on the Reserve Bank of Australia’s board meeting. | Welcome to the live blog on the Reserve Bank of Australia’s board meeting. |
It’s widely expected that the board will move the cash rate for the first time since August 2016 with all signs pointing to a 0.25% reduction to 1.25% at 2.30pm today. | It’s widely expected that the board will move the cash rate for the first time since August 2016 with all signs pointing to a 0.25% reduction to 1.25% at 2.30pm today. |
Bloomberg says that 36 out of 38 economists polled believe that the RBA will reduce the cash rate from its current 1.5%, itself already a record low. | Bloomberg says that 36 out of 38 economists polled believe that the RBA will reduce the cash rate from its current 1.5%, itself already a record low. |
The chances of a cut have hardened with figure this morning showing that retail sales in Australia fell by 0.1% in April. Forecasts were for the figure to rise 0.2% so that’s what market experts call a big miss on the downside. More analysis of that coming up soon. | The chances of a cut have hardened with figure this morning showing that retail sales in Australia fell by 0.1% in April. Forecasts were for the figure to rise 0.2% so that’s what market experts call a big miss on the downside. More analysis of that coming up soon. |
We’ll also be looking at whether the banks will pass on a cut to mortgage holders in the event that the RBA does reduce rates. Treasurer Josh Frydenberg said this morning that banks must pass the cut on. More on that too coming up. | We’ll also be looking at whether the banks will pass on a cut to mortgage holders in the event that the RBA does reduce rates. Treasurer Josh Frydenberg said this morning that banks must pass the cut on. More on that too coming up. |
This is all part of a big week of economic data for Australia with tomorrow seeing the release of GDP figures for the first three months of the year. For analysis of that and everything else this week you can read this excellent piece by my colleague Greg Jericho: | This is all part of a big week of economic data for Australia with tomorrow seeing the release of GDP figures for the first three months of the year. For analysis of that and everything else this week you can read this excellent piece by my colleague Greg Jericho: |
In a big week for the economy, there is some hope that things might improve | Greg Jericho | In a big week for the economy, there is some hope that things might improve | Greg Jericho |
And to get a little bit topical (apologies to readers in WA and the NT) ... | And to get a little bit topical (apologies to readers in WA and the NT) ... |
It will be a cold day in Queensland before the RBA cuts rates below 1.5%... https://t.co/mfldZCbTrA | It will be a cold day in Queensland before the RBA cuts rates below 1.5%... https://t.co/mfldZCbTrA |