To add to the headache of Reserve Bank of Australia's (RBA) policymakers, who are trying to tame slowdown using loose monetary policy at one hand, facing real estate price hike and deteriorating terms of trade at the other, inflation expectations among consumers rose to 14 month high.

RBA has kept policy steady and interest rate at 2%, facing pressure from a real estate bubble feeding from low exchange rate and interest rates, now faces rising inflation expectations, which at latest survey in December rose to 4%.

Though, outstanding loans made for investment purpose are down by $3.5 billion since April, it is still at quite a high at $11.5 billion, compared to just around $6 billion in 2011/12.

Weaker Aussie, other than providing support to exporters in the commodity segment, having some side effects too. It is contributing to worsening of terms of trade as well as feeding into inflation.

With above view, we expect RBA to hold policy steady into first half of 2016, unless major hard landing occurs in China.

Aussie is strong today, thanks to robust employment, which rose by 71,400, pushing unemployment lower to 5.8%, despite 0.3% rise in participation.

Aussie is currently trading at 0.729 against Dollar.