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Printed: 13 July 2024 12:20 AM


21 Jun 2024 - Hedge Clippings | 21 June 2024



Hedge Clippings | 21 June 2024

RBA's consistent message: Uncertainty abounds.

There was nothing surprising in Tuesday's statement from the RBA, and definitely not the fact the cash rate was left on hold - again. Having run through what the key numbers were, or are - inflation, employment, wage growth, etc., the key message was "uncertainty" about pretty much everything.

"The outlook remains highly uncertain" was the main section of the message, and the word uncertain cropped up multiple times, whether it be the outlook for inflation, economic growth, or consumption. Even "uncertainties regarding the lags in the effect of monetary policy" and then a "high level of uncertainty about the overseas outlook" and finally geopolitical uncertainties.

Just in case anyone hadn't been listening to the RBA for the past three years or so, the bottom line was "returning inflation to target is the priority," with the RBA's nominated mid point target of 2.5% not expected for 2 years until the middle of 2026. As such, it's going to be a long haul, unless the economy drops in a hole (which it is close to doing), whereupon it's going to be a long and hard haul.

Although the RBA mentioned overseas uncertainty, and specifically the geo-political risks in the Middle East and Ukraine, they didn't call out the potential for uncertainty surrounding the US presidential election in November. Not only is the outcome uncertain in what seems a close race between two candidates with an average age of 80, ( and only three years separating them which is about the only similarity between them), but in the event of a Trump victory, the uncertainty of what he will do - or what effect his policies will have, not only on America, but the rest of the world.

Tariffs to replace taxes? Ending the Ukraine war in a day? Alienating European allies? Cancelling AUKUS? One wonders if the rhetoric is pure electioneering to or for the converted, or if he wins, will he follow through?  Although anything is possible with Trump, uncertainty is certain.

As for cancelling AUKUS, that might remove the quandary that the government has found itself in, by supporting nuclear powered warships for the Australian Navy, but not being prepared to entertain nuclear powered electricity.

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