Australia’s central bank actively considered April rate hike before deciding on pause
AUSTRALIA’S central bank considered hiking rates for an 11th time in April before deciding to pause, but was ready to tighten further if inflation and demand failed to cool.
Minutes of the Reserve Bank of Australia’s (RBA) April 4 policy meeting released on Tuesday showed the decision not to hike was a close call, as a surprise surge in migration and pay rises for public workers added to the case for more action.
In the end, members felt it was best to hold for now and assess the impact of the steep 350 basis points of tightening already delivered which was clearly helping to cool consumer demand.
“Members agreed there was a stronger case to pause at this meeting and reassess the need for further tightening at future meetings,” the minutes showed.
The Board was keen to see data on inflation, employment, consumption and business conditions in April, along with the RBA staff’s updated economic forecasts before deciding whether to change the 3.6 per cent cash rate at the May meeting.
RBA Governor Philip Lowe has since emphasised that the pause did not imply the increases were over and it might tighten further should inflation and consumer demand stay hot.
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Of the data released so far in April, retail sales were softer than forecast but employment and business conditions stayed strong. Key figures on first-quarter consumer prices are due on April 26.
Two new topics much discussed at the meeting where population growth and public sector pay rises.
A surge in migration could lift population growth to a heady 2.0 per cent this year, well above previous forecasts and a strain on the limited supply of housing.
This was fueling increases in rents and putting a floor under house prices much earlier than first expected, the minutes showed.
Wage growth in the public sector was also set to increase this year after a long run of subdued gains, while the centre-left Labor government was supporting a sharp rise in the minimum wage to help offset high inflation.
The Board also noted the domestic banking system was strong enough to withstand recent stress in global financial markets and was not a handbrake on policy.
The government is due to release a review of the central bank that will likely canvass changes to its board structure and operations, perhaps including fewer meetings every year and more economic experts as members. REUTERS
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