Not always as you like it
Tuesday’s statement by Reserve Bank of Australia governor Glenn Stevens on his board’s monetary policy decision is a bit highbrow for The Note - so we thought we’d bring it back to earth.
Here’s an edited version with our carefully considered annotations. Just imagine you are part of the crowd at a Shakespearean theatre whose response to the guv’nor’s words are in brackets:
Global growth is forecast to be a little below average for a time (boo).
Risks to the outlook are still seen to be on the downside due to Europe, where economic activity is still contracting (more booing).
Risks elsewhere seem more balanced (hooray).
The US is recording moderate growth; China has stabilised (more hooraying); growth in Asia generally has been dampened (booing, feet shuffling).
Key commodity prices for Australia remain significantly lower (boo); though trends have been more mixed (rhubarb, rhubarb and other muttering). The terms of trade have declined but remain historically high (mutter, mutter). Financial markets are positive about progress regarding Europe's financial problems (hooray). Long-term interest rates remain exceptionally low (more general whooping). Capital and debt markets remain open to corporations and well-rated banks (hooray).
Share markets have generally been rising (clapping and more hoorays).
Australia's growth is running close to trend, led by spending in the resources sector (a champagne cork is popped).
That will peak next year, at a lower level than previously expected (sudden quiet murmuring).
Some recent consumption strength was temporary (complete silence).
Despite some improvements, a return to very strong growth in consumption is unlikely (muttering).
Investment in dwellings, subdued for some time, has shown indications of improvement (hooray). Non-residential building investment has remained weak. Public spending is forecast to be subdued (back to booing). Recent inflation was slightly higher than expected, but still consistent with the medium-term target (more murmuring).
The introduction of the carbon price affected consumer prices (a champagne bottle is heard breaking). There could be some further small effects over the next couple of quarters (cheering, but due to an effigy being rapidly consumed by flame).
Labour markets have softened and unemployment edged higher (booing), conditions that should work to contain pressure on labour costs (murmuring), with resources being the exception (hoorays heard from the northern and western fringes of the crowd).
This plus better productivity is needed to keep inflation low as effects on prices of a high Aussie dollar are waning (a lot of murmuring).
Interest rates are below medium-term averages (hooray); savers are incentivised to seek assets with higher returns (murmuring).
There are signs of easier conditions starting to have some of the expected effects (hooray).
Business demand for external funding has increased, the housing market is stronger and share prices have risen (much hooraying). The exchange rate is higher than expected (boo).
The impact of earlier easing of monetary policy can be expected over time (muttering).
On that basis: the board judged that the stance of monetary policy was appropriate for the time being (very loud booing, foot stomping and throwing of rotten vegetables).
