RBA's SoMP: Inflation Forecasts Slashed, Lowers Wages Outlook

RBA's SoMP: Inflation Forecasts Slashed, Lowers Wages Outlook

The RBA’s quarterly Statement on Monetary Policy (SoMP), issued quarterly, has been published, with the Central Bank lowering its inflation forecasts and wages outlook.

Key headlines - via Reuters

Policy easing based on lower inflation outlook, cooling in housing

Cuts inflation forecasts, gdp forecasts mostly unchanged yr average for 2016 revised up 0.5 ppt

Underlying inflation seen at 1-2 pct end 2016 (pvs 2-3 pct), 1.5-2.5 pct out to mid-2018 (pvs 2-3 pct)

GDP seen at 2.5-3.5 pct end 2016 out to end 2017, 3-4 pct to mid-2018

CPI data showed broad-based weakness in domestic cost pressures, slow growth in labour costs

Outlook for wage growth revised lower, to stay low for longer and then rise very gradually

RBA also cites retail competition, softer inflation in rental & home building, falling fuel & utility costs

Inflation expectations in australia below average, but have not declined as much as elsewhere

Outlook for domestic cost pressures, impact of a$ on inflation are key uncertainties

Unemployment seen around current rate to mid-2017, before declining gradually

Q1 gdp growth seen around same moderate pace as previous quarter

Household consumption to be a bit above average, net exports will continue to add to gdp

Outlook assumes recent rises in bulk commodity prices are not sustained, lng prices seen higher

Most of decline in mining investment to be over by end 2016, non-mining still subdued

Outlook for growth in australia's major trading partners revised a little lower