RBA flexible. Consumer confidence has a 9-week high

Minutes of the RBA Board of Directors meeting; Consumer confidence; CBA House Expenditure Plans

What happened? The management of the Australian Reserve Bank (RBA) released the minutes of the meeting on 7 September. At the meeting, the Commission decided to reduce its bond purchases by between $ 5,000 and $ 4 billion a week until at least mid-February 2022 due to a “severe” disruption to the economic recovery from the emergence of the Delta variant. The commission noted that the money rate is unlikely to rise “before 2024” as it does not expect to return to full employment or meet the requirements necessary to reach the 2-3 per cent inflation target by then.

ANZ-Roy Morgan’s weekly consumer confidence rating rose 0.2 percent to 103.3 (a 9.5-week average of 112.5). Sentiment rose 7.3 per cent in Queensland and rose 6.7 per cent in South Australia last week. But confidence fell 4.9 percent in NSW and 1.1 percent in Victoria because the closures were long.

Economists at the Commonwealth Bank (CBA) group reported that spending on home buying, travel, entertainment and education spending fell in August due to closures in NSW, Victoria and ACT.

Conclusions: Recent research by the Australian Retailers Association and Roy Morgan has shown that Aussie consumers will spend $ 11 billion this year on 48 per cent of Christmas gifts purchased online. But it may not be good news for Australian REIT shopping centers such as the Scentre Group and Environment Centers, which are both ready to reopen the NSW and Victorian economies.

Consumer confidence and household spending data have implications for retailers and other businesses focused on consumers. The minutes of the Reserve Banking Committee are important in measuring policy implementations.

What does it mean?

• The Australian Reserve Bank (RBA) Committee today published the minutes of the 7 September meeting. At the meeting, the Commission decided to slow or reduce its purchase of $ 4 billion to $ 4 billion a week until at least mid-February 2022, due to a “severe” disruption to the economic recovery of the Delta variant.

• The Commission has also stated that the rate of money is unlikely to rise “before 2024” as it does not expect to return to full employment or meet the requirements for achieving the 2-3 per cent inflation target by then.

• Of course, the long blockades in Sydney, Melbourne and Canberra have delayed the RBA’s policy efforts to reduce the unemployment rate to 4 per cent, boost earnings by around 3% and boost inflation sustainably.

• In its assessment of the economic outlook, the RBA Board of Directors acknowledged that the economic recovery is “W” shaped rather than a “V” shaped attachment that we saw as a way for Australians to adapt to life. a highly infectious Delta variant. In fact, policymakers said, “as the restrictions gradually lifted, the recovery could have been slower than before in the pandemic, when the end of the Covid-19 community transmission allowed the restrictions to be removed more quickly.”

• The updated assessment of the RBA now coincides with the view of economists in the Commonwealth Bank (CBA) group that they do not expect the Delta to return to a solid path to economic growth before the second half of 2022.

• And while the RBA will continue to be flexible with bond purchases as health conditions and economic conditions develop, we expect the Commission to finally slow purchases in February 2022 at a rate of $ 3 trillion a week through May 2022.

• Consumer confidence, as measured by ANZ and Roy Morgan, rose 0.2 percent to a 9-week high last week. Feelings jumped in the “Covid-free” states of Queensland (7.3% more) and South Australia (6.7% more). These gains fell largely in NSW (4.9%) and Victoria (1.1%) due to a long-term lockdown in confidence declines.

• Although in the new Covid-19 cases both the temporary peak in Greater Sydney and the rise in vaccination rates are allowed in October to potentially reduce government cuts, rising unemployment weighs on consumer morale. Last week, the Bureau of Statistics (ABS) reported that 210,000 jobs had been lost in the NSW in the past two months, with hours of work falling 6.5% in August due to orders from the Covid-19 government to “stay at home”. Of course, a big drop in jobs is likely to show up in the September staff survey, which is unmistakably blocked by Victorians.

• Consumer concerns were raised about a huge rise in livelihoods last week, as gasoline prices hit a record high in Brisbane and Melbourne. The ANZ / Roy Morgan measure of consumer inflation expectations over the next two years rose from 4.5 per cent from 4.7 per cent to 4.7% for the 33-month high last week.

• Some of the concerns about rising consumer prices and unemployment may feed the household into buying “high-card” items. In fact, the closely followed question of whether it’s a good time to “buy something important at home” fell 1.6 percent last week.

• Joyfully, the economists of the Commonwealth (CBA) group announced today, “[household] retail spending intentions showed some signs of stabilization in August 2021 compared to last year. However, retail spending in August 2021 was stronger than in August 2019. ABS reported data from retail trade on 28 September. After falling 1.8.

• The rebound following the closure of retail spending at the end of 2021 is likely to be more gradual compared to the sharp delay in the early stages of the pandemic last year. That said, the Australian Retailers Association (ARA) remains optimistic about the Christmas trade. ARA research published in conjunction with Roy Morgan has shown that Aussie consumers will spend a massive $ 11 billion this year with 48 percent of gifts purchased online this year.

• Of course, this may not be good news for Australian REIT shopping centers such as the Scentre Group and Environment Centers, both of which are ready to reopen with NSW and hope Victorian governments will release lock-in measures in the coming months.

What do you need to know?

Minutes of the meeting of the Reserve Bank Committee held on 7 September

Key quotes:

• Last paragraph: “The Council is firmly committed to maintaining the monetary conditions of solidarity, to return to full Australian employment and to achieve inflation that is in line with the target. “In order to meet this requirement, the labor market must be close enough to create a wage increase that was materially higher at the time of the meeting.”

• Short-term economic outlook: “The delay in the emergence of the Delta variant was delayed, but it was not reversed. GDP was expected to fall sharply in the September quarter; the short-term outlook resembled the downward scenario presented in recent forecasts. “

• Medium-term economic forecasts: “Beyond the September quarter, members agreed that the pace of the rebound in economic activity and the time to a large extent would depend on the removal of restrictions in response to health outcomes. As vaccine coverage increases, this would ease the restrictions and allow the recovery from the last delay to begin in the December quarter. It is likely that the restrictions will be phased out, as recovery could be slower than before in the pandemic, when the end of the Covid-19 community transmission allowed the restrictions to be removed more quickly. ”

• Labor market forecasts: “Consistent with the impact of the blockades on activity, members assessed that further improvements in the labor market would be delayed.”

• Decision to reduce bond purchases: “Two changes were examined. The first was to keep the final purchase rate at $ 5,000 billion a week until at least November 2021 and then review the program. The second was to have $ 4 trillion as announced for the purchase, but extend the period at which the bonds would be purchased at that rate until mid-February 2022. By mid-2022 the economic delta was expected to return to its previous path. , members assessed that the balance remained adequate reduction. The council also noted that other central banks are reducing bond purchases. Moreover, at $ 4 trillion a week, the Bank’s bond-buying program is expanding faster than the stock of bonds comparable to many other central banks. The council also saw value in providing greater clarity on the purchase of bonds after November 2021. “

• And, “The Council will continue to review the bond purchase program in the light of economic conditions and health conditions, and their implications for the progress expected to reach full employment and inflation.”

Consumer sentiment – The week ended September 19th

• The weekly ANZ-Roy Morgan consumer confidence rating rose 0.2 percent to a 9-week high of 103.3 (the long-term average since 1990 is 112.5). Three of the five major subsections were up last week.

Commonwealth Bank (CBA) Household Expenditure Plan (HSI) – August

• According to CBA economists, the highlights of the August HSI are:

• “House purchase spending plans rose in August 2021 compared to August last year, but the pace of improvement slowed from the H1 21 jump.

• Retail spending expectations were sluggish in August, but showed some stability from the recent decline.

• Travel spending plans continued to decline in August as blockages reduced the ability of Australians to travel.

• Intentions to make health and health spending changed little in August after the volatility seen through H1 21.

• Plans for leisure spending fell in August, with blockade restrictions limiting the ability to spend in the category.

• Expenditures on education continued to decline in August.

• Expenditure plans for motor vehicles have been variable since H1 21, when the economy opened and then closed again, but stabilized in August. “

Ryan Felsman, published by EconomS Senior CommSec