REPEAT:RBA Keeps GDP, Infl Outlook Despite Upbeat Jobs, Invest

Repeats Story Initially Transmitted at 05:08 GMT Sep 5/01:08 EST Sep 5

By Sophia Rodrigues

     SYDNEY (MNI) - Despite a more upbeat assessment of non-mining investment

and employment prospects, the Reserve Bank of Australia appeared to have played

a balancing act by leaving unchanged its commentary on the growth and inflation

outlook.

     The balancing act was required because any further optimism could push the

exchange rate higher and derail the economy's prospects. 

     In its policy statement Tuesday, the RBA met the expectations of both the

economists and the market by leaving the cash rate unchanged at 1.5% for the

12th meeting in a row.

     It also left unchanged its assessment that "holding the stance of monetary

policy unchanged at this meeting would be consistent with sustainable growth in

the economy and achieving the inflation target over time."

     A key change in the statement was the RBA's view that "various

forward-looking indicators point to solid growth in employment over the period

ahead" -- with "solid" being the important addition. This should see some lift

in wages growth over time, the RBA said.

     Still, the RBA made no change in the line from August, repeating that the

"unemployment rate is expected to decline a little over the next couple of

years."

     Another important and expected change was the comment on non-mining

business investment, which the RBA said "has improved recently". 

     But the 3% annual growth projection for the next several years was replaced

by the line that the "economy will gradually pick up over the coming year."

     Another key change was the comment on consumption, with the RBA omitting

the line that "one source of uncertainty for the domestic economy is the outlook

for consumption." At the same time, the RBA maintained that slow growth in real

wages and high levels of household debt are likely to constrain future growth in

spending.

     Overall, despite expectations that wage growth would see some lift, the RBA

made no change to the assessment in August that inflation is expected to pick up

gradually as the economy strengthens.

     There was no change in the commentary on the exchange rate, with the RBA

reiterating that "an appreciating exchange rate would be expected to result in a

slower pick-up in economic activity and inflation than currently forecast."

     The commentary on the housing market was also little-changed, with the only

important change being the RBA noting housing prices in Sydney were easing.

     On the global economy, the RBA repeated that "labor markets have tightened

further and above-trend growth is expected in a number of advanced economies,

although uncertainties remain."

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