Although significant progress was made on the economic activity front during the fourth quarter following the third quarter GDP contraction, policymakers at the Reserve Bank of Australia intend to leave low interest rates in place for some time. The weakening Australian dollar was cited as a positive development for the economy, especially amid the uptick in resource exports and the greater traction for inflation which remains “well anchored” according to the Monetary Policy Committee.
However, there are some soft spots in the economy, mainly attributed to weaker investment in the mining and minerals sectors while consumer spending remains subdued in light of weak income growth. On balance the minutes were optimistic, however, risks to the outlook remain, especially if the local currency appreciates. The Australian dollar fell after the announcement, with AUDUSD edging lower overnight.