Lowe More Dovish, Wage Outcomes Key

There were several take aways from the Q&A session following RBA Governor Lowe's speech.

• When Lowe was pressed as to why Australia wouldn't follow the path of other global central banks in terms of further aggressive hikes, he stated that the RBA would set monetary policy based on Australian-specific conditions.
• He added the strong differences in wage outcomes in Australia compared to the US. Given the institutional settings in wage outcomes in Australia we may not enter into a wage/inflation spiral.
• This will be key in determining how much higher rates go and at what pace, but that Australia may be able to avoid offshore experiences of higher wages/inflation and therefore much higher interest rates.
• In any case, this comment fits in with Lowe's earlier comment around slowing the pace of rate hikes (while remaining data dependent).
• The RBA also has no plans to embark on quantitative tightening (QT). The bonds on the balance sheet are expected to be held until maturity.
• All in all, the Q&A didn't reverse any of the context of the speech given earlier, with the overall tone from RBA Governor Lowe still coming across as dovish.