RBA continues to grapple with political uncertainty

RBA continues to grapple with political uncertainty. One of the things that's unsaid is that the political environment has become more uncertain, and that's constraining business confidence to some degree. The other thing that's unsaid is that global interest rates have come down over the past few months. And if the Reserve Bank kept Australian interest rates higher than the rest of the world, we would see a lot more capital inflow, which would put more upward pressure on the Australian dollar... Australia's unemployment rate has continued to climb higher and the rebalancing in the economy has been slower than expected. It's unlikely that a 25 basis point rate cut will be enough to change that... There is a clear risk that the Reserve Bank will over-inflate the Sydney housing market. Indeed, they appear to have subcontracted the housing price issue out to the prudential regulator. The assessment the Reserve Bank has made is that they can't just target Sydney house prices, and that lower interest rates are needed for the rest of the country.

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