The “Nos” won Tuesday: no interest rate cut from the Reserve Bank and no pay rise for low-paid workers from the Fair Pay Commission.
It could have been a very short meeting — a quick check of the latest figures, get out the June statement, make a couple of changes and then off to lunch.
The upshot is that the RBA is looking at the economy, which is doing what it should be doing after record rate cuts, stimulus and a 3% cash rate, the lowest in 49 years, and easing inflation.
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China continues to grow, credit remains tight, demand from business for credit is weak and in fact easing; only the housing sector seems alive, thanks to the stimulus moves for first home buyers.
But there was a message to the interest rate bulls in the market who claim there will be at least two rate rises of 0.25% over the next year (judging by futures market prices).
“Economic conditions in Australia have to date not been as weak as expected a few months ago. But output has been sluggish and capacity utilisation has fallen back to about average levels, with some further decline likely over the rest of the year.
“Weaker demand for labour is leading to lower growth in labour costs. These conditions should see inflation continue to abate over the period ahead.”
The RBA repeated its previous statement that it sees the falling rate of inflation (helped by a strong Australian dollar) to allow room for more interest rate cuts.
“The Board’s current view is that the outlook for inflation allows some scope for further easing of monetary policy, if needed.
“In assessing how it might use that scope, the Board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for a sustainable recovery in economic activity.”
And Australia’s lowest paid workers? No joy. Last year low paid workers across Australia received a $21.66 per week pay rise from the Commission, taking the minimum wage to $543.78 a week.
The ACTU had argued for another $21 per week rise, which would have lifted the minimum wage to $564.78 a 38-hour work week, while the Australian Chamber of Commerce and Industry opposed any wage increase.
About 1.3 million Australians, such as cleaners, childcare workers and those in hospitality, work under minimum wage conditions.
Commission chairman Ian Harper said the decision had been a very difficult one. ”These are uncertain times for the economy and for the Australian labour market, and in the commission’s view caution is warranted at this time in the setting of minimum wages,” Professor Harper said in a statement.
”This is not the time to risk the jobs of low-paid Australians by increasing minimum wages.”
In other words, it was a pay vs. jobs argument and jobs preservation won out.
Thursday we will see how bad the jobs picture is with June’s employment numbers with a 20,000 fall in the number of people employed and a rise to 5.9% for the unemployment rate tipped by the market.