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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

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