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The RBA Governor testifies on monetary policy and the economic outlook before the House Standing Committee on Economics on Friday morning in Canberra, not long after the Federal Reserve announces its decision on interest rates. Barclays notes:
We think he will be cautiously positive on the outlook and suggest that the RBA is comfortable with sitting tight on rates. We also think he will cover much the same ground as the Deputy Governor's speech, namely:
- The Chinese outlook is more uncertain, as Chinese authorities juggle a cyclical slowdown, structural challenges around the liberalisation of markets, and slower potential growth;
- The domestic economic is growing slowly, although the lower exchange rate is boosting growth and low interest rates are working; and
- A material recovery in non-mining investment remains some time off. We expect the governor to discuss the possibility that potential growth is now less than 3%, although he may stop short of offering a precise estimate. He may also take things further by discussing the implications of lower potential growth for the neutral cash rate.
As for the currency, we think he will argue that the exchange rate is adjusting to lower commodity prices, but add that further weakness would be welcome.
He may go further than this and argue that fair value for the exchange rate is now below 70 US cents (late last year he said in an interview that fair value had fallen to 75 cents).
