Unexciting RBA minutes; wage growth to remain moderate

The RBA board minutes (Tuesday) are likely to have less of an effect on the market than usual given that the RBA published its updated economic outlook in the latest Statement on Monetary Policy. That outlook saw the RBA lower its forecast profile for inflation, although the estimates for growth were little changed. 

This week's wage price index (Wednesday) is expected to reinforce the RBA's view that inflation will remain low (last: 0.6%), although the downside is that weak wages remain a constraint on consumer spending. That said, consumers have felt confident enough to spend at a moderately faster rate than income for some time now, saving at a slower rate as rising house prices have underpinned rapid growth in household wealth. Consumer surveys suggest that we could see a pickup in the pace of spending. 

At the same time, jobs growth has remained strong, running at an annual rate of 2%, while petrol prices have slumped again. This suggests that the fundamentals are improving at just the right time for demand, in that November and December typically account for 20% of retail spending in a year. Improving domestic economic conditions, especially in light of the latest strong employment report, support the view that the AUD is likely to outperform EUR even as Fed normalization lifts the USD against major currencies