The minutes of the RBA’s most recent meeting have been released, and they continue to be keen for interest rates to remain unchanged for the short to mid term.
They also continue to be concerned about the high Aussie dollar and the slowing mining industry.
The cash rate remained unchanged at 2.5 per cent and the RBA said the most prudent course to follow was likely to be a period of stability in interest rates.
“Low interest were working to support demand, but members agreed that it was difficult to judge the extent to which this would offset the anticipated substantial decline in mining investment and the effect of planned fiscal consolidation,” the RBA said.
“The exchange rate remained high by historical standards, particularly given the declines in key commodity prices, and was therefore offering less assistance than it otherwise might in achieving balanced growth in the economy.”
Tim Toohey from Goldman Sachs is tipping a rate cut of 25 basis points before the end of the year, but most economists think it won’t be until early next year.
Mr Toohey told The Age that ongoing weakness in consumer spending, higher unemployment, new fiscal imposts and ongoing weakness in commodity prices could all force the RBA to act by September.
The RBA said it expects slower GDP in the near future after surging earlier this year.
“With growth in resource exports expected to ease back, GDP growth was forecast to be a little below trend over the next year or so, before picking up gradually thereafter,” it said.
The RBA minutes for July did refer to the weak consumer demand, saying consumer sentiment had stabilised at below-average levels in the month of June.