2 Dec 2014
RBA: Little chance of a change in the key themes - Westpac
FXStreet (Bali) - Westpac's economics team sees little chance of a change in the key themes of the RBA’s commentary in recent months, adding that the statement should therefore provide no particular encouragement to markets pricing a 60% chance of a rate cut by Aug 2015.
Key Quotes
"Australia’s crowded data calendar (11:30am Syd/8:30am Sing/HK) probably holds more potential to move AUD than the RBA statement 3 hours later. We will see the final two inputs to finalize our Q3 GDP forecast – net exports and public demand – plus Oct building approvals. Any surprise in the net exports contribution relative to consensus should be modest, given we have seen preliminary Q3 trade data suggesting export volumes +2%, imports -1%. The 0.7ppt contribution expected would contrast to the unusually large -0.9ppt detraction in Q2."
"Public spending is worth about 20% of GDP so the Q3 public demand survey is important, notwithstanding its absence from newswire calendars. We look for a flat q/q outcome, with govt consumption up slightly but investment lower, judging by last week’s Q3 public construction data. Building approvals slumped a startling -11% m/m in Sep. This low base should set up Oct for a partial rebound, about 5% m/m in this volatile series."
"Aside from the virtually certain retention of a 2.5% cash rate, our economics team sees little chance of a change in the key themes of the RBA’s commentary in recent months. Our economists summarize these as, "On present indications the most prudent course is likely to be a period of stability in interest rates”; and “the Australian dollar remains above most estimates of its fundamental value.” The Q3 survey of business investment intentions for 2014/15 (actually conducted Oct-Nov) should provide the Board with optimism that the services sector will help pick up the slack from mining in 2015 and 2016. Meanwhile inflation is comfortably on target, not undershooting as in many other nations. The statement should therefore provide no particular encouragement to markets pricing a 60% chance of a rate cut by Aug 2015."
Key Quotes
"Australia’s crowded data calendar (11:30am Syd/8:30am Sing/HK) probably holds more potential to move AUD than the RBA statement 3 hours later. We will see the final two inputs to finalize our Q3 GDP forecast – net exports and public demand – plus Oct building approvals. Any surprise in the net exports contribution relative to consensus should be modest, given we have seen preliminary Q3 trade data suggesting export volumes +2%, imports -1%. The 0.7ppt contribution expected would contrast to the unusually large -0.9ppt detraction in Q2."
"Public spending is worth about 20% of GDP so the Q3 public demand survey is important, notwithstanding its absence from newswire calendars. We look for a flat q/q outcome, with govt consumption up slightly but investment lower, judging by last week’s Q3 public construction data. Building approvals slumped a startling -11% m/m in Sep. This low base should set up Oct for a partial rebound, about 5% m/m in this volatile series."
"Aside from the virtually certain retention of a 2.5% cash rate, our economics team sees little chance of a change in the key themes of the RBA’s commentary in recent months. Our economists summarize these as, "On present indications the most prudent course is likely to be a period of stability in interest rates”; and “the Australian dollar remains above most estimates of its fundamental value.” The Q3 survey of business investment intentions for 2014/15 (actually conducted Oct-Nov) should provide the Board with optimism that the services sector will help pick up the slack from mining in 2015 and 2016. Meanwhile inflation is comfortably on target, not undershooting as in many other nations. The statement should therefore provide no particular encouragement to markets pricing a 60% chance of a rate cut by Aug 2015."