“There were some increased risks, particularly around the global outlook and within the domestic economy. There were increased risks around consumer spending given the housing downturn, high household debt levels and soft growth in income.”
The RBA noted that “growth in a number of economies had slowed this year” and “there had been some loss in external demand in all regions”.
Slowing household consumption growth is also a risk for the Australian economy.
“The outlook for household consumption continued to be a source of uncertainty because growth in household income remained low, debt levels were high and housing prices had declined. Members noted that this combination of factors posed downside risks,” the minutes read.
“With house prices falling and global volatility and some of the global numbers less positive, I think there are reasons to be more cautious about the outlook for next year,” said David Plank, ANZ’s head of Australian economics.
He said this cautiousness was reflected in the RBA’s thinking, in particular around the housing market, international outlook and commodity prices.
However, Mr Plank said there were positive offsets highlighted too. Investment intentions in the non-mining sector and labour market conditions had both improved. Business credit growth was driven by large businesses, apparently at the expense of small to medium-sized enterprises.
Mr Plank noted that the federal government’s intentions to deliver a budget surplus will allow the government to cut taxes and lift spending to provide a fiscal boost the economy in 2019.
The Reserve Bank maintained its guidance that “the next move in the cash rate was more likely to be an increase than a decrease”.
Slowing household consumption growth is posting a risk for the Australian economy.
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