The Reserve Bank released the minutes of their February board meeting earlier this week. The key theme of the minutes is that the RBA is likely to maintain their neutral policy setting over the short term at least which implies a stable cash rate. The RBA sums it up with this quote from the Minutes: "the most prudent course would likely be a period of stability in interest rates". One of the Bank’s most challenging considerations is the higher than expected inflation reading for the December quarter and the reasons behind that high reading. Potentially the slower wages growth that has become evident, as well as stability in the lower Australian dollar will provide some easing to inflation over the coming year however the minutes suggest that the RBA is not completely clear as to the reason for the higher than expected result. The RBA appear comfortable with conditions across the housing market and are likely to be particular encouraged by the rise in dwelling approvals. Housing investment is one of the key economic pillars set to take over from mining related investment, so the fact that the annual number of dwelling approvals has moved 15.7% higher over the past year is a very positive endorsement of the RBA’s low cash rate setting.
The Australian Bureau of Statistics released their quarterly wage price index data for the December 2013 quarter earlier this week. The Index increased by 0.7% over the quarter and is 2.6% higher year-on-year. The 2.6% increase is below the rate of inflation and is the lowest year-on-year change on record (annual change records are available from September 1998). Over the year, private sector wages grew by a record low 2.5% compared to a slightly higher 2.7% increase in public sector wages. Interestingly, the Canberra Times has since reported that the Federal Government is planning a three year pay freeze or a deep reduction in entitlements for the nation’s 165,000 federal bureaucrats.
Weekly Clearance Rates
For the third auction week of 2014 there were 1,667 total auctions across the combined capital cities. The weighted average auction clearance rate was recorded at 70.2%. The auction clearance rate was higher than the 68.2% recorded over the previous week and at its highest level since early November of last year. The number of properties taken to auction was significantly up on the previous 972. Across Australia’s largest auction market, Melbourne, there were 783 auctions last week up from 335 the previous week. The auction clearance rate was recorded at 69.2% last week, up from 67.5% over the previous week. Sydney had 614 auctions last week and an auction clearance rate of 80.2%. The number of auctions was up from 362 the previous week and clearance rates also rose from 79.5% and were at their highest level since late September of last year. RP Data is currently tracking 2,621 capital city auctions over the current week.
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