Australian Reserve Bank's outlook

Excerpts from Minutes of the Monetary Policy Meeting of the Reserve Bank Board

Sydney – 5 May 2015

Growth of Australia's major trading partners had eased a little in the early months of 2015, but was forecast to remain close to its long-run average in 2015 and 2016. Weaker growth in China in the March quarter, which had also been reflected in lower bulk commodity prices and hence a slightly lower terms of trade

The Chinese property market had continued to be a source of weakness in the economy and represented a key source of uncertainty for the outlook, both through the effects on demand for industrial products and on the finances of local governments that relied on land sales to fund infrastructure projects.

Residential property prices had continued to fall, albeit at a more gradual pace, and sales were lower than in the previous year. Chinese demand for steel had eased and had been accompanied by a fall in Chinese iron ore production and relatively flat imports of iron ore, although Australian iron ore exports to China continued to grow.  

Although the prices of iron ore, thermal coal and oil prices had rebounded somewhat from recent lows, members observed that the slowing in the growth of Chinese demand for steel had contributed to declines in the prices of bulk commodities since the start of 2015.   

US economy had moderated in the March quarter, largely reflecting the temporary effects of disruptions related to severe weather and industrial action in West Coast ports. Over the same period, conditions in the labour market had continued to improve. Non-farm payrolls employment had continued to grow strongly over the past six months and the unemployment rate had declined further. The Federal Open Market Committee (FOMC) had indicated that it was likely to begin the process of normalising interest rates in the second half of the year as long as economic conditions continued to evolve as expected.

Growth in the Japanese economy looked to have been modest in the March quarter and there were signs that tight labour market conditions were generating stronger wage growth.

In the rest of east Asia, growth of both exports and domestic activity appeared to have slowed a little in the March quarter.

Economic activity in the euro area had continued to recover gradually over past few months.

In the United States, market pricing continued to suggest that the first increase in the US policy rate could be closer to the end of the year, and the subsequent pace of policy tightening could be slower than that envisaged by members of the FOMC as published in mid March.

On balance, taking all these factors into account, the Board decided that the best course was to ease monetary policy further at this meeting. 

Source: Reserve Bank of Australia,  

emphasis ours. 

Without risk or responsibility