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RBA Statement of Monetary Policy (August 2013)

RBA Statement of Monetary Policy (August 2013)

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Published by: leithvanonselen on Aug 09, 2013
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Semen onMonery Policy
auguSt 2013
Overview 1
International Economic Developments 5
International and Foreign Exchange Markets 13
Domestic Economic Conditions 25Box A: Measuring Business Investment 34
Domestic Financial Markets 37
Price and Wage Developments 47Box B: The Slowing in Wage Growth 51
Economic Outlook 53
 The material in this
Statement on Monetary Policy 
was inalised on 8 August 2013. The next
is due or releaseon 8 November 2013. The
Statement on Monetary Policy 
is published quarterly in February, May, August and November each year. All the
are available at www.rba.gov.au when released. Expected release dates are advised ahead o time on thewebsite. For copyright and disclaimer notices relating to data in the
, see the Bank’s website.
Statement on Monetary Policy 
EnquiriesInormation Department Tel: (612) 9551 9830Facsimile: (612) 9551 8033Email: rbaino@rba.gov.auISSN 1448–5133 (Print)ISSN 1448–5141 (Online)
august 2013
Overall, global economic growth appears to havebeen close to average in recent months, havingbeen a bit below average earlier in the year. TheChinese economy has been growing at around thesame pace as seen earlier in the year, which on anannualised basis is a bit below the authorities’ statedtarget o 7.5 per cent. Growth o total inancing inChina, which was very strong earlier in the year,looks to have slowed amid authorities’ concernsabout the strength o non-bank inancing. In Japan,the adoption o more expansionary monetary andiscal policies has seen the exchange rate depreciatesigniicantly since the end o last year and hassupported strong growth o the economy this year.In the rest o east Asia, weaker external demand isweighing on growth but domestic demand hasremained relatively resilient. The US economicrecovery is proceeding at a moderate pace,notwithstanding the eects o iscal consolidation. Incontrast, economic activity remains weak in the euroarea. Globally, inlation pressures have eased overthe past year and monetary policy has remainedhighly accommodative in most economies. The outlook or the global economy is a little soterthan at the time o the May
. World GDPgrowth is expected to remain close to averageover the rest o this year, but with annual averagegrowth around 3 per cent or 2013 relecting weakergrowth around the turn o the year. Growth is thenexpected to pick up, to be slightly above average in2014. Economic growth is expected to be strongeror Australia’s major trading partners than or theworld as a whole. The slightly weaker outlook thana ew months ago relects, among other things, theassessment that growth in China is now unlikely topick up much, i at all, in coming quarters. Rather, itis expected to remain at a pace that is close to theoicial target.Prices o most commodities have declined overthe past ew months, although spot prices or ironore remain little changed. While commodity pricesoverall remain at historically high levels, the priceso those commodities or which there has beensigniicant investment in capacity in Australia andglobally are projected to decline gradually over thecoming years. Accordingly, the terms o trade areexpected to decline over the medium term.Movements in inancial markets have beendriven by a reassessment o the uture path o USmonetary policy. In late May, the Federal Reservecommunicated that it may begin to wind downits asset purchase program later this year, leadingto expectations being brought orward or whenthe central bank would begin to tighten monetarypolicy. As a result, yields or sovereigns andcorporations moved markedly higher, althoughthey still remain very low relative to historical norms.Yields on emerging market government bondshave also moved higher. A number o emergingmarket central banks have tightened policy and/orintervened in currency markets, owing to concernsabout sharp reversals o capital inlows received overthe past ew years. Changes in expectations aboutUS monetary policy have also led to a broad-basedappreciation o the US dollar over recent months.

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