The Reserve Bank is set to give further clues to its decision to cut the cash rate to a new record low of 1.0 per cent this month, with the release of the minutes from its latest board meeting.
The first consecutive 0.25 percentage point cut since 2012 was widely anticipated after RBA Governor Philip Lowe had suggested a single cut in June would not be sufficient to reduce spare capacity in the labour market.
Dr Lowe said the second cut, on July 2, should put the economy on a “better path” but he also left the door open for another move before Christmas if things don’t improve.
Following the July meeting of the RBA board, Dr Lowe also repeated calls for the federal government to pull its weight with policy stimulus.
“It is appropriate to be thinking about further investments in (infrastructure), especially with interest rates at a record low, the economy having spare capacity and some of our existing infrastructure struggling to cope with ongoing population growth,” Dr Lowe said in a dinner speech to the business community in Darwin.
But Dr Lowe appeared surprisingly upbeat on the nation’s future following a meeting with Federal Treasurer Josh Frydenberg last week.
Mr Frydenberg invited Dr Lowe to his Melbourne office last Thursday, with the pair smiling for cameras while lauding Australia’s economic outlook.
“While the economy does face some significant challenges … the fundamentals – in Phil Lowe’s words – of the economy are strong,” Mr Frydenberg told ABC’s Insiders program on Sunday.
The RBA board’s July meeting minutes will be released at 1130 AEST on Tuesday.
Employment data for June awaits on Thursday.