**MNI 5 Things: RBA Highlights Growing International Risks

By Sophia Rodrigues

     SYDNEY (MNI) - Following are the five key observations we made from the

Reserve Bank of Australia's cash rate decision on Tuesday:

     --The RBA left the cash rate on hold at 1.5% as expected by both the

markets and the economists. The rate has been at this level since August 2016.

     --The RBA rightly highlighted concerns on the international side but

appears to be optimistic on the domestic economy. On the domestic economy, the

only noticeable change was the comment that housing credit growth has slowed

over the past year, especially to investors. The RBA doesn't appear to be

concerned about the impact of tightening of lending standards yet. It said that

while there may be some tightening, the average mortgage interest rate on

outstanding loans is continuing to decline. 

     --On the international front, the RBA highlighted three risks. It noted

that financial markets have been affected by political developments in the

eurozone, particularly in Italy. It also noted the concerns about the direction

of international trade policy in the U.S. and economic developments in a few

emerging market economies. In a speech following the May board meeting, RBA

Governor Philip Lowe had pointed to just one of these three as prominent risks,

which means the list of international risks have grown in the past month.

     --There were no changes in the commentary on wages growth despite the

latest report on wage price index published in mid-May. The entire commentary on

the labor market and wage growth was almost unchanged from the previous month.

The RBA remains optimistic that the unemployment rate will gradually decline,

and the wages growth would lift over time.

     --The comment on non-mining business investment was left unchanged and

there was no additional comment on public demand following the federal budget in

May. The RBA reiterated that higher level of public infrastructure investment

are supporting the economy. The RBA also repeated that the outlook for household

consumption remains one continuing source of uncertainty.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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