The Reserve Bank has left the door open to a rate cut, minutes of the September 4 monetary policy meeting show.
The minutes, released today, also noted subdued conditions in the housing sector and said recent sharp falls in commodity prices would be reflected “relatively quickly in export prices” as well as “slightly softer” global economic conditions”.
However the RBA board appeared less concerned about a drop in mining investment than other economic commentators, saying that if the fall in iron ore and coking coal prices were to be sustained, it could lead to somewhat lower mining investment.
“But given the large LNG and other mining investment projects already under way, the staff still expected there to be a substantial increase in resource investment over the next year or so,” the RBA says.
The board concluded that the “current assessment of the inflation outlook continued to provide scope to adjust policy in response to any significant deterioration in the outlook for growth”.
Looking at the housing market, the RBA notes:
“Conditions in the housing sector were subdued, but there were tentative signs of an improvement.
“Building approvals had increased strongly in the June quarter, and fell back in July, but remained a little higher than earlier in the year.
“Loan approvals for new dwellings and first-home owner grants had also risen in recent months. Dwelling prices had increased slightly over the previous three months in Sydney and Melbourne and were broadly unchanged in other cities, with turnover remaining low.”
In the September 5 post-cash rate decision statement, RBA governor Glenn Stevens noted that the impact of earlier cash rate cuts were still working their way through the economy, “but dwelling prices have firmed a little”.
Today’s September minutes reveal that the RBA board remains concerned about the global economy noting that new information over August “pointed to slightly softer conditions in many parts of the global economy”.
Locally, it noted a slight downturn in the mining and business environment reporting that “after a surge in mining investment in the March quarter, growth in business investment was estimated to have moderated in the June quarter”.
The minutes also acknowledge challenges faced by non-mining sector such as “some parts of the retail sector”.
This article was first published on LeadingCompany’s sister site, Property Observer.