No surprise from the RBA today, they left the cash rate at 2.75% as widely expected. The accompanying statement was one of the briefest in recent months and indicated that earlier rate cuts and the now very expansionary policy setting are contributing to a lift in spending. Growth is running a little below trend and the AUD is still a little above where they would expect it to be. The sentence that low inflation still allows them to cut rates further if needed still appears, but the quite terse earlier comments implies no need at present. The RBA still has a bias to ease policy, but it does not seem a particularly strong bias. We see the cash rate on hold until at least the Q2 CPI due in late July.
Other data before the RBA meeting showed net exports will contribute 1.0 pp to Q1 GDP growth, out tomorrow. Government financial statistics were also released and government consumption will contribute 0.1 pp to GDP. Government investment is a little harder to assess because of a very large change in ownership of assets in the state and local government sphere. This should not appear in GDP and if this is the case government investment is flat in Q1, that is no GDP contribution. At this stage, our forecast of Q1 GDP remains +0.8%,+ 2.7% yoy, indicating that the economy still grew well in Q1, despite a big fall in mining investment.