Sometimes what is not said is just as important as what you actually hear. That was the case with this weeks brief statement by the Reserve Bank Governor, Glenn Stevens.
Sure, the RBA board left rates steady on Tuesday, as every pet shop parrot knew they would. What counts more for getting a feel of what lies ahead on interest rates is what the Governor didn't say.
The key missing words were the ones that hinted that rates would have to rise again sooner rather than later. There was no qualifying “for the time being” after the decision to leave rates steady - it was just a blanket “the board views this setting of monetary policy as appropriate for the economic outlook”.
RBA's economic outlook
And the RBA's economic outlook remains rosy - employment growth continuing, albeit at a slightly slower rate, plenty of money pouring into the economy from the resources boom, the countries that matter most to us (India and China) continuing to grow strongly, inflation fine for a year or so and wages beginning to pick up. Not much wrong with that lot.
Given that favourable outlook then, one might be a little surprised that the Governor's statement was so neutral, with not even a hint of hawkishness. Maybe the complaints from retailers and the soft September quarter national accounts figures are bringing out the inner doves in Martin Place..
I was looking for a hint of disagreement with the Australian Bureau of Statistics' low GDP reading, but there was only a hint. Again, it was more about what wasn't said - the national accounts weren't mentioned at all. Instead, there was that favourable reading of the economy, especially the mention that “ employment growth has been very storng over the past year”.
The economy is soft
No doubt the board minutes when they're released on November 23 will have to deal with the discrepancy of the ABS saying the economy is soft while the RBA is reading it as strong, but for now, Glenn Stevens isn't giving it any public attention. It shows a certain confidence.
And Thursdays' labor force figures would make him more confident about that. In previous board minutes, the RBA has remarked on just such a discrepancy when the ABS GDP figure is soft by employment growth is strong. It simply doesn't make sense that there were 54,600 new jobs last month if the economy was as weak as some would like to make out.
(As an aside, I cheated in the paragraph above by using the seasonally adjusted jobs number - the one everyone else in the media uses. The trend figures don't bounce around nearly as much as the seasonally adjusted numbers and therefore don't get mentioned.
The bottom line
While everyone else was making a feature of seasonally adjusted unemployment falling from October's 5.4 to 5.2 per cent, I prefer the trend series version which states that unemployment rose from 5.2 per cent to 5.3 - there was still good jobs growth and the participation rate was up a notch, so it's still the same basic story, just not as gee-whiz-amazing - and therefore more likely to be accurate.)
So, we have a central bank that isn't rattling its interest rate sabre any more, just reminding us that rates are only a little above average at a time of strong economic growth that is resulting in strong jobs growth. It's not a bad picture, is it?
