December is here and as the temperature rises the countdown to the Christmas break begins. But it appears at least one Australian is determined to ‘chill’. When Reserve Bank governor Glenn Stevens was asked recently about the possibility of an interest rate cut he said: “We’ve got Christmas, we should just chill out …come back … and see what the data says.” The markets took that as a no, for December at least.
The data released in November was certainly mixed. Employment is strong, with unemployment down from 6.2 per cent to 5.9 per cent in October, but wages growth is the slowest in decades. And new business spending on buildings and equipment fell 9.2 per cent in the September quarter, the biggest quarterly fall on record. Expectations of future investment were also down 20 per cent on a year earlier, although up 4.8 per cent on the previous quarter. A strengthening dollar, to around US$0.72, isn’t helping the slow transition to a post-mining boom economy.
The US Federal Reserve is also playing a waiting game with interest rates. Employment and the housing market are strong, raising expectations of the first rate rise in seven years as early as this month. One thing the commentators do agree on is that future rate increases are likely to be gradual. December 2015 – Summer Update
Merry Christmas and a happy and prosperous New Year everyone!