Interest rates appear to be on hold for now as the Reserve Bank of Australia (RBA) adopts a reasonably optimistic appraisal of the state of the domestic economy.
In his opening statement to the House of Representatives Standing Committee on Economics last Friday, Reserve Bank Governor Glenn Stevens cited strong terms of trade, low unemployment, strong financial institutions, a sound currency and a sovereign credit position that is “in the international top tier” as factors underlying confidence in the capacity of the local economy to hold up in spite of global uncertainty..
“If we are entering another period of weaker international conditions,” Mr. Stevens said, “this is a pretty good starting point from which to do so.”
Despite acknowledging that there were “significant forces at work” in the domestic economy, the central bank governor is also not overly concerned about the recent pullback in consumer spending, which he said may help to build resilience in household balance sheets.
On the other side of the coin, Mr. Stevens’ appraisal of the situation regarding inflation is perhaps more encouraging still. Though the central bank is far from at ease about current inflation levels, and is not optimistic about the near term outlook on prices, the RBA does appear confident that softening global conditions will keep both consumer demand and wage pressures in check.
“Inflation bears careful watching,” Mr. Stevens said, “but we can keep it under control.”
All this adds up to a central bank which is comfortable with the current position of both inflation and the economy, and is not in a hurry to adjust rates in either direction.
Aussie Dollar Stabilises
Since its fall earlier this month, the Australian dollar now seems to have stabilised and last week saw little in the way of movement from the Aussie against major currencies.
Our dollar finished the week on Friday at USD1.048, JPY80.96 and EUR0.727.
Commodity prices edge back up
Commodity prices bounced back late last week on assurances from US Federal Reserve Chairman Ben Bernanke that the American economy should improve over time and that the central bank stood ready to take further action to support the economy if required.
In significant commodities affecting the construction industry:
• Copper ended the week at two-week highs. Along with strength from Mr. Bernanke’s comments, the metal has risen on fears of tightening supply. Inventories now stand at just above 460,000 megatons (MT), according to Metalprices.com. At this level, currnent inventories stand at more than twice the level three years ago but are still well off their peak of around 480 MT experienced in recent months.
• Inventories have also tightened for zinc, the price of which rose back up above $US1.00 per pound on Friday after having touched lows of $US0.95 per pound earlier in the month.
• The effect of BlueScope Steel’s recent announcement of the scaling down of its domestic steel production operations on local steel prices remains to be seen. The company, which is closing down its local steel export business, made efforts to assure customers about its commitment to the domestic market.
Globally, as previously reported on DesignBuildSource, steel prices have eased off from last autumn’s highs. As at July, the most recent month for which data is available, the global carbon steel price stood at $US860 per tonne.
