**MNI POLICY: RBA Statement Errs On Positive Side

By Sophia Rodrigues

     SYDNEY (MNI) - The Reserve Bank of Australia left the cash rate on hold at

1.5% Tuesday as expected by both the market and the economists. This was the

23rd straight meeting that the cash rate has been left on hold. The RBA last

moved the rate in August 2016 when it lowered by 25 basis points to 1.5%.

     Following are the five key observations we made from the RBA's cash rate

statement:

     --The overall statement errs slightly towards a positive tone as flagged by

MNI State of Play published Monday. Two key comments suggest this positive bias

-- the RBA estimating that the economy grew above trend in the first half of

2018, and the RBA noting that the fall in jobless rate to 5.3% is the lowest in

almost six years.

     --There was no mention of local political risks and neither does the RBA

appear worried about the rise in mortgage rate announced by Westpac, the first

and only big four bank to do so. The RBA merely said that some lenders have

increased mortgage rates by small amounts but the average mortgage rate is still

lower than a year ago.

     --The RBA acknowledged the recent depreciation in the Australian dollar

versus the U.S. dollar, noting most other currencies also fell against the U.S.

dollar. On a trade-weighted basis, the Australian dollar remains within the

range it has been in over the past two years, the RBA said.

     --The RBA said business conditions are positive and non-mining business

investment is expected to increase. This is largely a statement of fact as the

Q2 capex data showed a fall in capex q/q but a significant rise in capex

intentions in the latest update.

     --The commentary on the housing market was largely unchanged. Commentary on

China, global growth and inflation, and uncertainty stemming from the direction

of international trade policy in the U.S. were also unchanged.

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

[TOPICS: MMLRB$,M$A$$$,M$L$$$,MT$$$$]