Takeaways from RBA minutes

Today Reserve bank of Australia released its monetary policy minutes. Reaction from Aussie was somewhat mute, however Aussie is trading in back foot after speech by Governor Stevens last night, who still believes Aussie to be overvalued and gradually decline over time.

Key highlights from the minutes -

Positives -

• RBA takes note of divergent growth across Globe. US is growing, along with recovery in UK Europe and Japan.
  
  
• Growth in dwelling investments, consumption and resource exports have picked up, which is providing support to domestic economy.
  
  
• Housing market showing strength, as low interest rate environment continue to boost loan growth in the sector. RBA expects housing growth to continue over the coming quarters.
  
  
• Resource exports growth is showing strength, however RBA expects lower oil price to slowdown net export and production this year.
  
  
• Various forward looking indicators, according to RBA pointing to strength in labor market.

Negatives -

• Business investment continue to decline whereas overall demand, consumer confidence, value of retail trade all improved but still remain below average.
  
  
• Mining investments declined 13% over 2014, and larger reduction is expected this year. Lower commodity prices including oil price, according to RBA would keep investments in the sector subdued. Lower commodity prices are leading to divergent recovery in Australia, with mining states doing worse.
  
  
• RBA, expects lower oil prices would lead to lower prices of LNG, another key exports over the coming quarters.

Compared to previous statements, RBA is more upbeat over the economy, even worried about overheating the housing sector with low interest rates. However, RBA still expects Aussie to be somewhat weaker than peers given the drop in key exports.

Aussie is currently trading at 0.77, down -0.2% today so far.