MNI PREVIEW: RBA To Leave Rate At 0.75% Despite Weak Retail

By Lachlan Colquhoun

     SYDNEY(MNI) - The Reserve Bank of Australia is expected to leave official

interest rates unchanged at a record low 0.75% at its meeting on Tuesday, after

today's retail sales figures showed little impact from its three cuts so far

this year.

     The RBA cut in June, July and October, halving the Cash Rate in an attempt

to stimulate a faltering domestic economy. Governor Philip Lowe has said there

are signs of a "gentle recovery" in recent months.

     The RBA now says its main monetary policy goal is the creation of "full

employment" and unemployment rate ticked lower to 5.2% in September.

     Inflation last week showed ticked up to 1.7%, still outside of the Bank's

2% to 3% target range but finally moving in the right direction.

     The positives in the labour force and inflation data, however, were

undermined by disappointing retail sales data today, with a rise of only 0.2%

during September and a - 0.1% seasonally-adjusted decline during the third

quarter.

     So far, the biggest impact from the rate cuts has been in the housing

market, with house prices in the two biggest markets of Melbourne and Sydney

coming back strongly after steep falls, up 2.3% and 1.7% respectively in

October, according to private research.

     The RBA has welcomed the housing market recovery, saying that it could

translate into greater consumer confidence.

     With rates at 0.75%, the RBA will be aware that it now has limited room for

manoeuvre within the field of conventional monetary policy.

     More on the RBA's outlook will be revealed in the next Statement on

Monetary Policy, due this Friday.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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