Lowe not for turning
For those interested in such matters, today saw the delivery a very interesting speech from Governor Philip Lowe.
Summarily, although there has been a spike in inflation in some areas, the conditions which have produced lower inflation over the past decade and more have not gone away (globalisation, improvements in technology, the ability to outsource work to Asia, etc.).
Although wages are expected to rise from here, the latest data and forecasts do not warrant an increase in the cash rate in 2022, stated Government Lowe once again.
You can read the transcript here (or by clicking on the image below):
Financial markets still beg to differ, pricing for a potential salvo of interest rate hikes in the second half of calendar year 2022.
Source: ASX
Lowe confirmed that whatever markets may think, the Reserve Bank will not hike rates to stamp out housing price growth.
Where to next?
Lots of moving parts here, of course.
Generally speaking, my recent experience in Europe suggests to me that although we might to see an initial "hedonism trade" as folks get excited about experiencing sociable activities again, working practices may take plenty longer to get back to something akin to 'normal' than expected.
Also pulling against the reopening euphoria will be Aussies desperate to travel overseas again after a two-year hiatus, leaking their Antipodean 'stimmy cheques' and Aussie dollars overseas, while the swelling of the labour force as international students and other arrivals return may also cap wages growth before it takes off in earnest.
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In real time, Australia went through 38 million vaccine doses delivered today.
New South Wales has now double-dosed more than 90 per cent of its population aged over 12, so Sydney will be first cab off the rank for an economic sugar hit as the international borders reopen.
