Mixed Signals From Data Releases

This week has seen the release of important economic indicators covering growth, retail sales, and house prices. The general consensus was that the lower than expected June quarter growth and consumer spending figures were early indicators of evidence of the long predicted slow down of the Australian economy.

However, as some analysts have pointed out, the level of consumer spending is still quite solid, though not as over the top as earlier in the year, housing prices continue to climb and GST driven income tax cuts are just around the corner.

So where does this point to the future direction of rates?

In our view there is still enough heat in the domestic economy, combined with the likelihood of a further US rate rise next month for the local interest rate pendulum to swing from a neutral stance to one of a possibility of tightening.

Next weeks job's data will give a better indication of this position, with greater than expected job growth increasing the chance of a rate rise.

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