tag:theconversation.com,2011:/id/topics/reserve-board-of-australia-4374/articlesReserve Board of Australia – The Conversation2014-09-02T02:40:08Ztag:theconversation.com,2011:article/311622014-09-02T02:40:08Z2014-09-02T02:40:08ZEconomic outlook in Australia remains murky<figure><img src="https://images.theconversation.com/files/57974/original/h6ktw7xz-1409622658.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The picture of Australia's economy right now is murky.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/psjeremy/8038770631/sizes/l/in/photolist-dfmNrD-7sjK5J-jfcXA2/">PSJeremy/Flickr </a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p><em>The CAMA RBA Shadow Board is a project by the Centre for Applied Macroeconomic Analysis, based at the ANU, which asks industry and academic economists what interest rate the Reserve Bank of Australia should set.</em></p>
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<p>The picture of the Australian economy painted by the latest data is murky. The housing market and indicators of sentiment are strengthening but growth remains slightly below trend and the unemployment rate rose to 6.4% in July. Relative to the previous month, the CAMA RBA Shadow Board has become slightly more cautious in its recommendations for interest rates. The Board attaches a 74% probability that the cash rate ought to remain at 2.5% in September. The confidence attached to a required rate cut equals 6%, while the confidence in a required rate hike has dropped to 21%.</p>
<p>Australia’s unemployment rate increased 0.3 percentage points to 6.4% in July 2014, a 12-year high. This rise is largely attributable to an increase in the participation rate — the number of persons in the labour force swelled by 43,000, while total employment fell slightly. Policy makers will be keeping a close eye on the developments in the labour market, in particular whether the additional job seekers are going to succeed in finding employment in the near future.</p>
<p>There is no new inflation data available to guide this month’s policy decision, with headline inflation officially still hugging the top of the 2-3% target band. Business indicators are looking up, with the NAB Business Confidence, the Manufacturing PMI, the Australian PSI, and the capacity utilisation rate all improving in the last month. GDP growth is estimated to lie just below trend. </p>
<p>The construction industry is responding positively to the housing boom, picking up some of the economic slack left behind from the slowdown in mining investment but some Board members remain concerned about inflated asset prices, particularly house prices in Sydney and Melbourne.</p>
<p>Worldwide foreign exchange markets are characterised by exceptionally low volatility. The Australian dollar has moved very little in the past few months, still buying around 93 US cents. There is still some uncertainty about the federal government’s budget and the government’s ability to navigate the Senate remains.</p>
<p>Mixed news also characterises the global economy. The US economy looks more solid, with recent second quarter GDP growth revised up to 4.2% (annualised). The US Federal Reserve’s hints of future tightening of US monetary policy is likely to weaken the Australian dollar and may provide greater scope for a domestic rate increase. </p>
<p>News of the Chinese real estate markets is providing further evidence of considerable excess supply with house prices in some cities, especially at the luxury end, falling sharply. Europe’s recovery is faltering and, most worryingly, there are signs of Germany’s economy slowing significantly. The major geopolitical conflicts (Syria, Ukraine, Middle East) are unlikely to be resolved any time soon.</p>
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<h2>What the CAMA Shadow Board believes</h2>
<p>The consensus to keep the cash rate at its current level of 2.5% has strengthened to 74% (up 3 percentage points from August). The probability attached to a required rate cut equals 6% (5% in August) while the probability of a required rate hike has fallen again to 21% (24% in August).</p>
<p>The six month probability that the cash rate should remain at 2.5% edged up two percentage points to 49%. The estimated need for an interest rate increase equals 42% (45% in August), while the need for a decrease equals 9% (8% in August). A year out, the Shadow Board members’ confidence in a required cash rate increase slipped 4 percentage points to 61%, the need for a decrease ticked up to 10%, while the probability for a rate hold strengthened slightly to 29% (26% in August).</p>
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<h2>Comments from Shadow Reserve bank members</h2>
<p>Paul Bloxham, Chief Economist (Australia and New Zealand), HSBC Bank Australia Ltd:</p>
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<p><strong>“Growth looks to have been below trend.”</strong></p>
<p>Indicators of sentiment have continued to improve over the past month, notwithstanding an uptick in the measured unemployment rate in July. The established housing market has also shown signs of continued exuberance, particularly in Sydney and Melbourne. There have been further signs of a strong upswing in residential construction although, at the same time, mining investment has continued to fall. Overall, growth looks to have been below trend around the middle of the year, although the collection of indicators suggest that domestic conditions appear to have improved in the past month or two. </p>
<p>Given improving momentum in local growth and the booming housing market, the case for a further cash rate cut is weak. A key source of tension for the Australian economy remains the high AUD, particularly in the face of falling iron ore and coal prices and a significant narrowing in the interest rate differential between Australia and the US (the 10-year bond spread is around an 8-year low). </p>
<p>The combination of falling commodity prices and a high AUD is putting downward pressure on local income growth and helps to explain further weakness in the labour market. Australia’s growth prospects could be noticeably improved by a
lower AUD, but it remains a significant challenge to orchestrate such as move, with much dependent on international conditions. While a further cut in the cash rate could encourage the AUD to fall, lower rates could also drive excessive risk taking
in an already booming housing market and eventually threaten financial stability. </p>
<p>I recommend the cash rate is left unchanged this month. I expect that the cash rate may need to be lifted in the next six-12 months, to prevent a housing bubble from inflating, but the scope to lift rates is somewhat conditional on the direction the Australian dollar takes. </p>
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<p>Mark Crosby, Associate Professor, Melbourne Business School:</p>
<p><strong>“Rates may be at the lowest level they will be in our lifetimes.”</strong></p>
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<p>With the US continuing on track towards normalisation of monetary policy, the likelihood of the RBA cutting rates is receding. It is quite possible that current rates are at the lowest level they will be in our lifetimes. However, the speed of rate rises is likely to be slow in the next 1-2 years, with weak growth in advanced economies likely to be the norm.</p>
<hr>
<p>Bob Gregory, Professor of Economics at Australian National University:</p>
<p><strong>“We just have to wait and see for a while.”</strong></p>
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<p>This is a very slow time at the moment. We just have to wait and see for a while.
Looking forward a year international forces will encourage the Australian rate upwards, but domestic considerations will probably encourage the rate downwards with the likelihood of little change being high.</p>
<hr>
<p>John Romalis, Professor of Economics at the University of Sydney:</p>
<p><strong>“Faster GDP growth from rising commodity exports should be somewhat discounted.”</strong></p>
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<p>The Australian economy still seems to be slightly soft, with moderately elevated unemployment levels contributing to low wage growth and moderate inflation rates. Looking forward, rising housing construction should help offset the negative effects of declining mining investment. </p>
<p>Faster GDP growth from rising commodity exports should be somewhat discounted because fewer workers are required to run mines than to build mines and associated infrastructure. Economic and financial conditions in our main trading partners appear to be increasingly robust, which should help restore domestic confidence and keep commodity prices at fairly high levels. So while rates should remain constant for now, there is a greater likelihood that the target cash rate should rise later in the forecast horizon.</p>
<p><em>Note: John Romalis has replaced Saul Eslake on the CAMA RBA Shadow Board.</em></p>
<hr>
<p>Jeffrey Sheen, Professor and Head of Department of Economics, Macquarie University, Editor, The Economic Record, CAMA:</p>
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<p>The news about the labour market in August suggests that the current accommodative stance of monetary policy needs to continue, along with a marginally higher delay before it needs to begin reversing.</p>
<hr>
<p><em>VERDICT FOR SEPTEMBER: cash rate ought to remain at 2.5%.</em></p><img src="https://counter.theconversation.com/content/31162/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Timo Henckel receives funding from the Centre for International Finance and Regulation.</span></em></p>The CAMA RBA Shadow Board is a project by the Centre for Applied Macroeconomic Analysis, based at the ANU, which asks industry and academic economists what interest rate the Reserve Bank of Australia should…Timo Henckel, Research Associate, Centre for Applied Macroeconomic Analysis, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/262892014-05-05T03:27:14Z2014-05-05T03:27:14ZRates: housing-led upswing, but tight budget may drag growth<figure><img src="https://images.theconversation.com/files/47768/original/kqp9x4yn-1399257380.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Economic activity led by housing is strengthening - but a tough budget may dampen growth. </span> <span class="attribution"><span class="source">AAP/Lukas Coch</span></span></figcaption></figure><p>Latest economic news shows some promising signs for the Australian economy. However, the new government’s first budget next Tuesday is a big unknown. </p>
<p>The <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6202.0">unemployment rate fell to 5.8%</a> in March while full time employment fell by 22,000 and the participation rate edged down to 64.72%. Monthly job vacancies remained strong, only 1% below the long-run average.</p>
<p><a href="http://www.tradingeconomics.com/australia/indicators">Core inflation</a> lies a little above the middle of the RBA’s target band of 2-3%. The Australian dollar has held up during the past month, now valued at 93 US cents. Asset markets, in particular housing, remain buoyant. Domestic consumption and production indicators are continuing on their modest upward trend.</p>
<p>Internationally, the clouds appear to be lifting ever so slightly. <a href="http://www.federalreserve.gov/newsevents/press/monetary/20140430a.htm">US economic data is improving</a> and the US Federal Reserve Board announced a further reduction of its asset purchasing program. Several European crisis countries, foremost Greece, are finally showing signs of rebounding. In particular, their increased access to international credit markets at favourable conditions has surprised many analysts. <a href="http://www.abc.net.au/news/2014-04-16/chinas-annual-growth-rate-slows-to-74-per-cent/5395906">China’s growth is slowing</a>, and the possibility of a credit crunch remains real, but a growth rate of 7% is considered by many to be a lower bound.</p>
<p>The big unknown for Australia is the forthcoming federal government budget. It will likely be contractionary for the economy overall as the Coalition government seeks to reduce spending in a long-term effort at balancing the budget. Moreover, there is much speculation about the distributive implications of the budget. If the budget turns out to be tight and regressive, it will reduce aggregate demand and increase the likelihood that interest rates remain low.</p>
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<p>The Centre for Applied Macroeconomic Analysis (CAMA) Shadow Board is 74% confident that the cash rate should remain steady at 2.5%, strengthening slightly from a confidence rating of 71% in April. The probability attached to a required rate cut equals 6% - up from 4% in April - while the probability of a required rate hike has fallen to 20%, from 25% in April.</p>
<p>The six month probability that the cash rate should remain at 2.5% edged down to 37% (39% in April). The estimated need for an interest rate increase is virtually unchanged at 48%, while the need for a decrease has risen slightly to 16% (12% in April). A year out, the Shadow Board members’ confidence in a required cash rate increase has dropped 8 percentage points to 59%, the need for a decrease rose to 18% (down from 14% in April), while the probability for a rate hold has increased to 23% (down from 19% in April).</p>
<p><em>Note: Mardi Dungey was unable to vote in this round.</em></p>
<hr>
<p><strong>Paul Bloxham, Chief Economist (Australia and New Zealand), HSBC Bank Australia Ltd:</strong></p>
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<a href="https://images.theconversation.com/files/47727/original/363vk2fk-1399252620.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47727/original/363vk2fk-1399252620.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47727/original/363vk2fk-1399252620.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47727/original/363vk2fk-1399252620.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47727/original/363vk2fk-1399252620.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47727/original/363vk2fk-1399252620.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=468&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47727/original/363vk2fk-1399252620.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=468&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47727/original/363vk2fk-1399252620.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=468&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The Q1 CPI numbers showed that underlying inflation is just a touch above the middle of the RBA’s target band. To a large degree, this vindicates previous interest rate settings, given the lags involved in the transmission of monetary policy to the economy. It also helps to support the case for the RBA to leave its interest rate setting unchanged for the moment. </p>
<p>However, monetary policy needs to be forward looking, and recent timely indicators continue to suggest that economic activity is lifting, led by the housing sector and largely in response to the current very stimulatory setting of the cash rate. This month also saw further evidence that the lift in activity is beginning to translate into job creation, with the unemployment rate ticking down to a
four-month low. </p>
<p>As yet, there are limited tangible signs that businesses are considering an increase in their capital expenditure, although this tends to occur in tandem with an increase in hiring. Should the current improving trends in activity and the labour market persist, the risks to inflation should be expected to shift to the upside, at which point, the RBA would need to consider starting to move its cash rate back towards a neutral setting. A very tight budget is a downside risk to this outlook and could be a consideration for monetary policy in coming months. I recommend that the cash rate is left unchanged this month at 2.5%, but
still see it as more likely than not that the cash rate will need to be higher than its current level in 12 months time.</p>
<hr>
<p><strong>Mark Crosby, Associate Professor, Melbourne Business School:</strong></p>
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<p>While indicators for both the domestic economy and the international economy continue to be mixed, ongoing asset price increases should lead to a tightening bias in coming months. My expectation is that China will achieve growth around the 7% range in 2014, underpinning net exports and near trend GDP growth in Australia for the calendar year. </p>
<hr>
<p><strong>Saul Eslake, Chief Economist, Bank of America Merrill Lynch Australia:</strong></p>
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<a href="https://images.theconversation.com/files/47730/original/2vwdvjp4-1399252624.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47730/original/2vwdvjp4-1399252624.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47730/original/2vwdvjp4-1399252624.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47730/original/2vwdvjp4-1399252624.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47730/original/2vwdvjp4-1399252624.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47730/original/2vwdvjp4-1399252624.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47730/original/2vwdvjp4-1399252624.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47730/original/2vwdvjp4-1399252624.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>No comment. </p>
<hr>
<p><strong>Bob Gregory, Professor Emeritus, RSE, ANU, Professorial Fellow, Centre for Strategic Economic Studies, Victoria University, Adjunct Professor, School of Economics & Finance, Queensland University of Technology:</strong></p>
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<a href="https://images.theconversation.com/files/47733/original/stpfvzq8-1399252627.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47733/original/stpfvzq8-1399252627.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47733/original/stpfvzq8-1399252627.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47733/original/stpfvzq8-1399252627.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47733/original/stpfvzq8-1399252627.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47733/original/stpfvzq8-1399252627.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47733/original/stpfvzq8-1399252627.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47733/original/stpfvzq8-1399252627.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<a href="https://images.theconversation.com/files/47732/original/8w89rx37-1399252625.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47732/original/8w89rx37-1399252625.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47732/original/8w89rx37-1399252625.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47732/original/8w89rx37-1399252625.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47732/original/8w89rx37-1399252625.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47732/original/8w89rx37-1399252625.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47732/original/8w89rx37-1399252625.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47732/original/8w89rx37-1399252625.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<a href="https://images.theconversation.com/files/47734/original/9d6fpnwt-1399252628.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47734/original/9d6fpnwt-1399252628.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47734/original/9d6fpnwt-1399252628.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47734/original/9d6fpnwt-1399252628.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47734/original/9d6fpnwt-1399252628.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47734/original/9d6fpnwt-1399252628.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47734/original/9d6fpnwt-1399252628.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47734/original/9d6fpnwt-1399252628.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>No comment.</p>
<hr>
<p><strong>Guay Lim, Professorial Research Fellow and Deputy Director, at the Melbourne Institute of Applied Economic and Social Research, Melbourne University:</strong></p>
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<a href="https://images.theconversation.com/files/47722/original/9qg8qf7q-1399252615.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47722/original/9qg8qf7q-1399252615.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47722/original/9qg8qf7q-1399252615.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47722/original/9qg8qf7q-1399252615.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47722/original/9qg8qf7q-1399252615.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47722/original/9qg8qf7q-1399252615.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=491&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47722/original/9qg8qf7q-1399252615.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=491&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47722/original/9qg8qf7q-1399252615.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=491&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<a href="https://images.theconversation.com/files/47735/original/zk89zwqy-1399252628.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47735/original/zk89zwqy-1399252628.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47735/original/zk89zwqy-1399252628.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47735/original/zk89zwqy-1399252628.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47735/original/zk89zwqy-1399252628.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47735/original/zk89zwqy-1399252628.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=491&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47735/original/zk89zwqy-1399252628.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=491&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47735/original/zk89zwqy-1399252628.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=491&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<a href="https://images.theconversation.com/files/47736/original/s48wtsvp-1399252630.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47736/original/s48wtsvp-1399252630.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47736/original/s48wtsvp-1399252630.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47736/original/s48wtsvp-1399252630.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47736/original/s48wtsvp-1399252630.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47736/original/s48wtsvp-1399252630.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=491&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47736/original/s48wtsvp-1399252630.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=491&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47736/original/s48wtsvp-1399252630.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=491&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>It is difficult to argue for a change in the current stance of monetary policy. Yes, leading indicators are signalling improvements, but they are not strong enough to warrant an increase in the cash rate now. On balance, I still think it would be prudent to keep the cash rate at 2.5%, for now. </p>
<hr>
<p><strong>Warwick McKibbin, Chair in Public Policy in the ANU Centre for Applied Macroeconomic Analysis (CAMA) in the Crawford School of Public Policy at the Australian National University:</strong></p>
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<a href="https://images.theconversation.com/files/47728/original/wghchgrp-1399252622.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47728/original/wghchgrp-1399252622.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47728/original/wghchgrp-1399252622.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47728/original/wghchgrp-1399252622.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47728/original/wghchgrp-1399252622.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47728/original/wghchgrp-1399252622.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47728/original/wghchgrp-1399252622.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47728/original/wghchgrp-1399252622.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<a href="https://images.theconversation.com/files/47747/original/7vgy5tzy-1399252641.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47747/original/7vgy5tzy-1399252641.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47747/original/7vgy5tzy-1399252641.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47747/original/7vgy5tzy-1399252641.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47747/original/7vgy5tzy-1399252641.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47747/original/7vgy5tzy-1399252641.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47747/original/7vgy5tzy-1399252641.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47747/original/7vgy5tzy-1399252641.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<a href="https://images.theconversation.com/files/47748/original/pxq2kbyn-1399252642.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47748/original/pxq2kbyn-1399252642.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47748/original/pxq2kbyn-1399252642.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47748/original/pxq2kbyn-1399252642.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47748/original/pxq2kbyn-1399252642.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47748/original/pxq2kbyn-1399252642.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47748/original/pxq2kbyn-1399252642.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47748/original/pxq2kbyn-1399252642.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>No comment.</p>
<hr>
<p><strong>James Morley, Professor, University of New South Wales, CAMA:</strong></p>
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<a href="https://images.theconversation.com/files/47723/original/73658tzw-1399252615.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47723/original/73658tzw-1399252615.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47723/original/73658tzw-1399252615.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47723/original/73658tzw-1399252615.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47723/original/73658tzw-1399252615.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47723/original/73658tzw-1399252615.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47723/original/73658tzw-1399252615.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47723/original/73658tzw-1399252615.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<a href="https://images.theconversation.com/files/47738/original/fpcjrsmb-1399252632.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47738/original/fpcjrsmb-1399252632.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47738/original/fpcjrsmb-1399252632.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47738/original/fpcjrsmb-1399252632.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47738/original/fpcjrsmb-1399252632.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47738/original/fpcjrsmb-1399252632.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47738/original/fpcjrsmb-1399252632.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47738/original/fpcjrsmb-1399252632.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<a href="https://images.theconversation.com/files/47737/original/75xw7x3j-1399252631.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47737/original/75xw7x3j-1399252631.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47737/original/75xw7x3j-1399252631.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=374&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47737/original/75xw7x3j-1399252631.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=374&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47737/original/75xw7x3j-1399252631.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=374&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47737/original/75xw7x3j-1399252631.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=469&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47737/original/75xw7x3j-1399252631.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=469&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47737/original/75xw7x3j-1399252631.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=469&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Inflation remains stable. But the economy is fragile, especially given a likely fiscal contraction. In light of this, the RBA should keep the policy rate low for longer than previously planned, despite the risks of financial imbalances arising from interest rates remaining below more neutral levels. </p>
<hr>
<p><strong>Jeffrey Sheen, Professor and Head of Department of Economics, Macquarie University, Editor, The Economic Record, CAMA:</strong></p>
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<a href="https://images.theconversation.com/files/47725/original/2j9c9skp-1399252618.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/47725/original/2j9c9skp-1399252618.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/47725/original/2j9c9skp-1399252618.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=373&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47725/original/2j9c9skp-1399252618.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=373&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47725/original/2j9c9skp-1399252618.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=373&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47725/original/2j9c9skp-1399252618.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=468&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47725/original/2j9c9skp-1399252618.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=468&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47725/original/2j9c9skp-1399252618.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=468&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>My recommendations for monetary policy in May 2014 have become marginally more accommodative. The government has been revealing that the federal budget is likely to significantly consolidate current and future government expenditure and tax revenues. Many of the measures will aim to address important longer run issues, but they will all have the shorter term consequence of delaying the slow recovery of the Australian economy. The global recovery, which is becoming
broader and stronger, is unlikely to be enough to counteract the fiscal consolidation. Therefore, monetary policy will need to remain accommodative for somewhat longer, thus postponing its normalisation.</p><img src="https://counter.theconversation.com/content/26289/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Timo Henckel receives funding from the Centre for International Finance and Regulation.</span></em></p>Latest economic news shows some promising signs for the Australian economy. However, the new government’s first budget next Tuesday is a big unknown. The unemployment rate fell to 5.8% in March while full…Timo Henckel, Research Associate, Centre for Applied Macroeconomic Analysis, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/111102012-12-03T03:51:36Z2012-12-03T03:51:36ZAcademics v practitioners: split views within the Shadow Board<figure><img src="https://images.theconversation.com/files/18266/original/9sjz2bf5-1354505309.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A cut in Australia's cash rate tomorrow has been factored in by most economic practitioners, but Shadow Board academics are split over whether it should.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Many economists think the RBA Board will cut the cash rate this month. With commodity prices projected to be weakening, financial markets suggest a rate cut is likely. Mind you, many practitioners suggested a cut was coming last month too, and it didn’t materialise.</p>
<p>The nine experts on the Shadow Board, a mix of practitioners and academics, give their views on what the interest rate should be, rather than predicting actual RBA Board behaviour. The novel construction of the Shadow Board permits analysis of the individual opinions both across a range of interest rate settings and through time.</p>
<p>Overall, the Shadow Board strongly supports leaving rates unchanged in December at 3.25%, with around 55% weight. A decrease to 3.00% receives approximately 30% weight. </p>
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<p>However, there is a split in views between academics and practitioners, with HSBC Chief Economist Paul Bloxham and Bank of America Merrill Lynch Chief Economist Saul Eslake both preferring a cut in the cash rate to 3.00%. </p>
<p>Mr Eslake calls for more support for the the non-mining sector to help combat “headwinds” such as a persistently strong Australian dollar, cautious consumers, low business confidence and fiscal consolidation.</p>
<p>Mr Bloxham says it appears investment intentions for the next year have been revised down, with only “modest” signs that previous rate cuts are having an effect.</p>
<blockquote>
<p>“While the interest rate cuts that have occurred so far are providing some tentative support for the housing market, retail spending and consumer sentiment, business confidence is still below average.”</p>
</blockquote>
<p>Although many of the academics see weakening inflationary pressures over the next six months, most prefer a slower path of adjustment for interest rates. </p>
<p>Longer term, several experts anticipate that rates will have to rise.</p>
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<a href="https://images.theconversation.com/files/18267/original/kvxs22bj-1354505785.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/18267/original/kvxs22bj-1354505785.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/18267/original/kvxs22bj-1354505785.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/18267/original/kvxs22bj-1354505785.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/18267/original/kvxs22bj-1354505785.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/18267/original/kvxs22bj-1354505785.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/18267/original/kvxs22bj-1354505785.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/18267/original/kvxs22bj-1354505785.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<hr>
<p><strong>Paul Bloxham, Chief Economist (Australia and New Zealand), HSBC Bank Australia Ltd</strong></p>
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<p>Inflation remains contained and indicators released during the month suggest a further loosening in labour market conditions, limiting the chances that future wages growth will be excessive. The continued high level of the Australian dollar also reduces the upside risk to inflation. At the same time, information received during the month suggests that investment intentions have been revised downwards for 2012/13. </p>
<p>While mining investment is still expected to rise, the outlook for investment by the non-mining sectors of the economy remains weak. While the interest rate cuts that have occurred so far are providing some tentative support for the housing market, retail spending and consumer sentiment, business confidence is still below average. With upside risks to inflation diminishing, weakening investment intentions and only modest signs that monetary policy is driving rebalancing of growth as yet, I recommend the cash rate is cut by a further 25 basis points this week.“</p>
<p><strong>Also see Paul’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong></p>
<hr>
<p><strong>Mark Crosby, Dean of the Global MBA Program, Acting Dean of the Global BBA Program, and Professor of Economics, SP Jain Center of Management in Singapore</strong></p>
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<p>The global outlook has not changed much in the past month. Europe continues to plan to have a solution to the insoluble. US debt and housing markets aren’t changing in any significant manner and Asia continues to bubble along. Much focus in Australia has been on a China slowdown, but a more worrying outcome is the sluggish growth and political difficulties with further reforms in India. There would still be a risk to downside shocks during the next 12 months, but also a reasonable likelihood of muddling through. The muddling through outcome would necessitate increasing rates from currently very low levels at some point in 2013.</p>
<p><strong>Also see Mark’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong></p>
<hr>
<p><strong>Mardi Dungey, Professor, University of Tasmania, CFAP University of Cambridge, CAMA</strong></p>
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<a href="https://images.theconversation.com/files/18239/original/yyd32428-1354494159.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/18239/original/yyd32428-1354494159.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/18239/original/yyd32428-1354494159.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/18239/original/yyd32428-1354494159.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/18239/original/yyd32428-1354494159.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/18239/original/yyd32428-1354494159.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/18239/original/yyd32428-1354494159.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/18239/original/yyd32428-1354494159.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>My outlook is <a href="https://theconversation.com/interest-rates-should-stay-put-10543">unchanged from last month</a>. Given the massive uncertainties still present in the international economy and the potential need to retain flexibility for easier monetary policy in the future, it seems appropriate to retain the current short term setting for monetary policy.</p>
<p><strong>Also see Mardi’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong></p>
<hr>
<p><strong>Saul Eslake, Chief Economist, Bank of America Merrill Lynch Australia</strong></p>
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<p>Monetary policy needs to provide more support to growth in the non-mining sectors of the economy in order to maximise the prospects of overall growth remaining close to trend as the mining investment boom approaches and passes its peak, especially given the "headwinds” which the non-mining sectors continue to confront (a persistently strong Australian dollar - increasingly a problem for the mining sector as well), cautious consumers, low business confidence and “fiscal consolidation”.</p>
<p><strong>Also see Saul’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong> </p>
<hr>
<p><strong>Bob Gregory, Professor Emeritus, RSE, ANU, Professorial Fellow, Centre for Strategic Economic Studies, Victoria University, Adjunct Professor, School of Economics & Finance, Queensland University of Technology</strong></p>
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<a href="https://images.theconversation.com/files/18241/original/87dgbn4x-1354494259.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/18241/original/87dgbn4x-1354494259.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/18241/original/87dgbn4x-1354494259.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/18241/original/87dgbn4x-1354494259.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/18241/original/87dgbn4x-1354494259.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/18241/original/87dgbn4x-1354494259.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/18241/original/87dgbn4x-1354494259.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/18241/original/87dgbn4x-1354494259.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>No comment.</p>
<p><strong>Also see Bob’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong></p>
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<p><strong>Warwick McKibbin, Professor, RSE, ANU, CAMA</strong></p>
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<a href="https://images.theconversation.com/files/18242/original/pg8245km-1354494712.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/18242/original/pg8245km-1354494712.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/18242/original/pg8245km-1354494712.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/18242/original/pg8245km-1354494712.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/18242/original/pg8245km-1354494712.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/18242/original/pg8245km-1354494712.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/18242/original/pg8245km-1354494712.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/18242/original/pg8245km-1354494712.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>No comment.</p>
<p><strong>Also see Warwick’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong></p>
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<p><strong>James Morley, Professor, University of New South Wales, CAMA</strong></p>
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<a href="https://images.theconversation.com/files/18244/original/z8p7528v-1354494776.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/18244/original/z8p7528v-1354494776.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/18244/original/z8p7528v-1354494776.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/18244/original/z8p7528v-1354494776.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/18244/original/z8p7528v-1354494776.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/18244/original/z8p7528v-1354494776.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/18244/original/z8p7528v-1354494776.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/18244/original/z8p7528v-1354494776.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Given little change in economic conditions (the unemployment rate stabilised in October after an uptick in September) and no new information on inflation or growth, the current stance of somewhat loose monetary policy remains appropriate. Inflation can be expected to remain within the target range in the near term, while developments in China, the United States, and Europe will likely continue to cancel each other out, implying ongoing moderate growth of international demand in 2013.</p>
<p><strong>Also see James’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong></p>
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<p><strong>Jeffrey Sheen, Professor and Head of Department of Economics, Macquarie University, Editor, The Economic Record, CAMA</strong></p>
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<a href="https://images.theconversation.com/files/18245/original/fqdpxgxr-1354494847.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/18245/original/fqdpxgxr-1354494847.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/18245/original/fqdpxgxr-1354494847.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/18245/original/fqdpxgxr-1354494847.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/18245/original/fqdpxgxr-1354494847.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/18245/original/fqdpxgxr-1354494847.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/18245/original/fqdpxgxr-1354494847.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/18245/original/fqdpxgxr-1354494847.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The current Australian cash rate is one notch above the rate that was reached in the depth of the financial crisis, and I do not think the current risks for the Australian economy are anything close to those then. Since there has been little information in the last month to change my view about the current state of the Australian economy, my recommendations remain unchanged. Investment intentions data, though not actual investment data, have weakened. However monetary policy should not be fine-tuned to such uncertainties. Obama’s election in the US does not resolve the fiscal cliff risk, but it does reduce the likelihood of an inappropriately large fiscal consolidation. The prospects in China and Europe are not much different to last month.</p>
<p><strong>Also see Jeffrey’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong></p>
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<p><strong>Mark Thirlwell, Director, International Economy Program, Lowy Institute for International Policy</strong></p>
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<a href="https://images.theconversation.com/files/18246/original/5ffpt4t5-1354494881.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/18246/original/5ffpt4t5-1354494881.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/18246/original/5ffpt4t5-1354494881.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/18246/original/5ffpt4t5-1354494881.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/18246/original/5ffpt4t5-1354494881.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/18246/original/5ffpt4t5-1354494881.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/18246/original/5ffpt4t5-1354494881.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/18246/original/5ffpt4t5-1354494881.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>No comment.</p>
<p><strong>Also see Mark’s <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-6month/">six month</a> and <a href="http://cama.crawford.anu.edu.au/pro-pol/outcome-november2012-12month/">12 month</a> projections.</strong></p><img src="https://counter.theconversation.com/content/11110/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Shaun Vahey receives funding from the ARC via a Linkage grant, with the RBA as a partner organisation.</span></em></p>Many economists think the RBA Board will cut the cash rate this month. With commodity prices projected to be weakening, financial markets suggest a rate cut is likely. Mind you, many practitioners suggested…Shaun Vahey, Professor, ANU College of Business and Economics , Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.