It’s that first Tuesday in the month, and that means the Reserve Bank of Australia’s board meets to announce its cash rates decision.
Well, the board members do take a break over summer (unless there’s a financial meltdown, or its opposite, a meltup?) and so won’t be back to torment us until early February. (Checks calendar: 1 February, in fact.)
Anyway, today’s decision won’t change the official rate at its record 0.1%. The cash rate target was cut in November 2020 and the focus of pundits will be any signs of when the RBA might lift that rate.
So far, the bank has been keen to stress its patience about not lifting the cash rate until inflation is firmly within it 2%-3% a year range, and talked about 2024 as the aim.
Surging global inflation has possibly pulled that back to 2023.
Also of interest (so to speak) will be comments about whether the RBA is going to stop buying up government debt before its planned binge winds up in February. By then, the RBA will be the proud owner of about 40% of government debt, which it will one day have decide what to do with.
In the meantime, most economic indicators are showing consumers are cashed up and ready to spend, and that job ads are on the rise.
An ANZ Roy Morgan Consumer Confidence report out this morning showed that confidence added another 1.4% in the past week, while inflationary expectations remain steady on a four-week rolling average.
A factoid of the day is also from the ANZ. It notes how household consumption as a proportion of the economy has dived to about 51% down from 55% before the pandemic.
With $200bn plus in extra savings and job security looking better by the day (Omicron, permitting), that low ratio is set for a big rebound, most economists think, which could end up surprising the RBA in a way that won’t be great for interest rates.
Seems like household consumption peaked at about 56.5% in 2011, perhaps when the carbon price introduction was offset by income support.
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