MNI 5 Things:RBA Lowe Appears More Convinced Next Rate Move Up

By Sophia Rodrigues

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

Reserve Bank of Australia governor Philip Lowe's speech Wednesday. Lowe spoke at

the AFR Business Summit in Sydney on the topic, "The Changing Nature of

Investment."

     --Lowe appears more convinced than he has been in the recent past that the

next move in interest rates in Australia will be up. He said the RBA's

assessment is that "the economy is moving in the right direction" and interest

rates are still quite low, so it is likely that the next move in interest rates

will be up, not down. Note last month Lowe's comments were a bit more

conditional when he said that the RBA expects to make further progress in

reducing unemployment and having inflation return to the midpoint of the target

range and "If we do make that progress, at some point it will be appropriate for

interest rates in Australia to also start moving up."

     --Most other comments by Lowe regarding monetary policy were a reiteration

of what he previously said. He repeated that the progress in reducing

unemployment and having inflation return to target is likely to be gradual.

"With only gradual progress expected, the Board does not see a strong case for a

near-term adjustment of monetary policy. We will, of course, keep that judgement

under review at future meetings.:

     --Lowe said consumer price index in Australia will average between 2 and 3

per cent. And while some variation could be expected, over the medium-term the

average inflation rate will be "2 point something."

     --Lowe reiterated that the RBA pursues its inflation objective in a way

that promotes sustainable growth in the economy and pays close attention to

financial stability risks.

     --Lowe touched upon the corporate tax issue and in this instance appeared a

bit more supportive. He said, "Over recent times there has also been quite a lot

of discussion about the effect of tax on the investment climate and

international competitiveness. This is an important discussion to have as

Australia does need to remain an attractive place for global capital to invest."

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

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