Westpac Economics' Weekly Economic Update

This week saw the RBA take a less strident tone in its discussion of the AUD, with the currency now seen as "adjusting to the significant declines in key commodity prices"; previously, a further depreciation of the AUD was regarded as being both “likely and necessary”. The August Statement on Monetary Policy (released after filming) also included a relatively neutral set of forecasts (inflation in target band; growth firming to an above-trend pace in 2016/17), implying a desire to hold rates steady for a protracted period. Other data out this week was mixed. Real retail sales growth was stronger than expected in Q2; activity was broad based by store type but geographically narrow, being strongest in the south east. The July labour force outcome was a wild result, with 38k new jobs created but a 0.2ppt rise in the unemployment rate to 6.3% also seen due to stronger participation. That 30k of the 38k total jobs gain occurred in NSW highlights the reliance of aggregate jobs growth on the south east.