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STATEMENT ON MONETARY POLICY – FEBRUARY 2007

Contents

List of tables

Table 1: Commodity Prices

Table 2: Changes in Monetary Policy

Table 3: Equity Markets

Table 4: Change in US Dollar against Other Currencies

Table 5: Australian Dollar against Selected TWI Currencies

Table 6: Demand and Output

Table 7: House Prices

Table 8: Rental Vacancy Rates

Table 9: Labour Market by State

Table 10: Interest Rates

Table 11: Interest Margins and Losses on Housing Loans

Table 12: Financial Aggregates

Table 13: Non-government Net Bond Issuance by Sector

Table 14: Measures of Consumer Prices

Table 15: Median Inflation Expectations

Table 16: RBA Inflation Forecasts
Table 1: Commodity Prices
Percentage change; SDR

Three months to
January 2007

Year to
January 2007

RBA index
0.3

9.9

Rural
3.3

9.6

– Wheat
–4.0

16.3

– Beef & veal
–1.2

4.1

– Wool
26.6

41.5

– Sugar
–2.8

–33.3

Base metals
–2.2

46.0

– Aluminium
3.9

13.8

– Copper
–24.9

16.7

– Nickel
11.1

143.0

– Zinc
–2.0

76.7

Other resources
0.4

–1.1

– Coking coal^(a)
–0.9

–18.6

– Steaming coal^(a)
–2.1

–10.6

– Iron ore^(a)
–1.0

13.0

– Gold
6.0

11.0

Memo item

Oil in US$^(b)
–6.9

–16.0

(a) Latest available data are for December.

(b) Oil prices are not included in the RBA index.

Sources: ABS; AWB; AWEX; Bloomberg; Meat and Livestock Australia; RBA

..................................................................................................................................

Table 2: Changes in Monetary Policy
	Current level Per cent	Most recent change		Change since end 2005		Expectations for next 6 months

United States	5.25	↑	Jun 06	↑	100 bps	No change
Euro area	3.50	↑	Dec 06	↑	125 bps	↑ 50 bps
Japan	0.25	↑	Jul 06	↑	25 bps	↑ 25 bps
United Kingdom	5.25	↑	Jan 07	↑	75 bps	↑ 50 bps
Canada	4.25	↑	May 06	↑	100 bps	No change
New Zealand	7.25	↑	Dec 05		No change	↑ 50 bps

Sources: central banks; Bloomberg; Reuters

..................................................................................................................................

Table 3: Equity Markets
Percentage change
	Since 2000 peak	Since 2003 trough	2006	Since previous Statement

United States
– Dow Jones	8	68	16	5
– S&P 500	–5	81	14	5
– NASDAQ	–51	96	10	5
Euro area
– STOXX	–12	149	20	7
United Kingdom
– FTSE	–8	94	11	2
Japan
– TOPIX	–2	124	2	9
Canada
– TSE 300	15	111	15	6
Australia
– ASX 200	75	118	19	9
MSCI Emerging Asia	28	162	24	9
MSCI Latin America	191	282	34	13
MSCI World	1	106	14	6

Source: Bloomberg

..................................................................................................................................

Table 4: Change in US Dollar against Other Currencies
Per cent
	2006	Since previous Statement

Sweden	–14	–1
Thailand	–14	–6
United Kingdom	–12	–3
Euro area	–10	–1
Brazil	–9	–2
Indonesia	–9	–1
South Korea	–8	0
Philippines	–8	–3
Singapore	–8	–2
Australia	–7	–1
Switzerland	–7	0
Malaysia	–7	–4
China	–3	–2
New Zealand	–3	–3
India	–2	–1
Taiwan	–1	0
Canada	0	5
Japan	1	2
Mexico	2	0
South Africa	11	–1
Majors TWI	–5	1
Broad TWI	–4	0

Source: RBA

..................................................................................................................................

Table 5: Australian Dollar against Selected TWI Currencies
Percentage change
	2006	Since previous Statement

South Africa	19	–1
Japan	9	4
US	8	2
Canada	8	6
Taiwan	7	2
PNG	6	2
New Zealand	5	–2
China	4	0
Switzerland	1	1
Philippines	0	–2
South Korea	0	1
Singapore	–1	0
Indonesia	–1	1
Euro area	–3	0
UK	–5	–2
Sweden	–7	–1
TWI	4	1

Source: RBA

..................................................................................................................................

Table 6: Demand and Output
Percentage change
	June qtr 2006	September qtr 2006	Year to September qtr 2006

Domestic final demand	1.2	0.1	3.4
Change in inventories^(a)	–0.7	–0.1	–0.8
GNE^(b)	0.7	–0.1	2.5
Net exports^(a)	–0.2	0.4	–0.5
GDP	0.5	0.3	2.2
Non-farm GDP	0.7	0.6	2.6
Farm GDP	–5.1	–10.0	–11.4
Memo item:
Real GDP adjusted for changes in the terms of trade	0.9	0.7	3.6

(a) Contributions to GDP growth
(b) Includes the statistical discrepancy
Source: ABS

..................................................................................................................................

Table 7: House Prices
Percentage change
	APM		REIA		Residex

	Dec qtr 2006	Year to Dec qtr	Dec qtr 2006^(a)	Year to Dec qtr	Dec qtr 2006	Year to Dec qtr

Sydney	1	1	..	..	1	1
Melbourne	1	3	1	5	1	4
Brisbane	1	5	..	..	2	7
Adelaide	3	8	–1	4	2	7
Perth	1	31	3	37	2	27
Canberra	3	5	3	8	–2	3
Hobart	–1	7	–3	5	4	8
Darwin	5	17	–4	13	0	21
Australia	1	6	..	..	1	8

(a) Seasonally adjusted by the RBA
Sources: APM; REIA; state REIs; RBA; Residex

..................................................................................................................................

Table 8: Rental Vacancy Rates
Per cent, seasonally adjusted
	1979–2005 Average	2006^(a)

Sydney	2.4	1.9
Melbourne	2.8	1.7
Brisbane	3.6	1.9
Adelaide	2.9	1.6
Perth	3.7	1.8
Canberra	2.9	1.8
Australia	2.9	1.8

(a) Estimate based on data for the first three quarters
Sources: RBA; state REIs

..................................................................................................................................

Table 9: Labour Market by State
Three-month-ended basis, per cent
	Employment growth		Unemployment rate

	Three years to January 2007, annualised	Year to January 2007	January 2004	January 2007

NSW	1.6	2.1	5.5	5.0
Victoria	2.4	2.4	5.5	4.9
Queensland	4.4	5.4	6.2	4.1
WA	3.6	2.2	5.9	3.1
SA	1.9	2.0	6.7	5.5
Tasmania	2.2	–0.8	7.0	5.9
Australia	2.6	2.8	5.8	4.6

Source: ABS

..................................................................................................................................

Table 10: Interest Rates
Per cent, February 2007
	Cash rate	Actual rate on new housing loans^(a)	Actual business rate^(a)

Level	6.25	7.45	7.80
Deviation from decade average	1.05	0.80	0.00

(a) RBA estimates
Sources: APRA; RBA

..................................................................................................................................

Table 11: Interest Margins and Losses on Housing Loans
Basis points
	2000	2002	2004	2006

Prime, full-documentation loans
Interest margin^(a)	155	145	135	125
Losses^(b)	3	2	1	1
Sub-prime loans
Interest margin^(a)	na	425	390	290
Losses	na	na	5	19

(a) Spread between the interest rate on new variable-rate housing loans and the cash rate
(b) For loans held on the balance sheets of the four major banks
Sources: banks’ annual reports; ABS; RBA; Standard and Poor’s

..................................................................................................................................

Table 12: Financial Aggregates
Average monthly growth, percentage change
	March quarter 2006	June quarter 2006	September quarter 2006	December quarter 2006

Total credit	1.2	1.2	1.2	1.1
Household	1.0	1.3	1.2	1.0
– Owner-occupier housing	1.2	1.3	1.4	1.1
– Investor housing	0.8	1.3	0.8	0.7
– Personal	0.8	1.0	1.2	0.9
Business	1.4	1.1	1.1	1.2
Broad money	1.0	0.9	1.0	0.8

Source: RBA

..................................................................................................................................

Table 13: Non-government Net Bond Issuance by Sector
$ billion
Sector	2003	2004	2005	2006

					of which December quarter

Bond issues by Australian entities
Onshore
Financial institutions	3.8	8.8	16.6	15.7	2.7
Non-financial corporates	2.8	4.4	3.9	7.2	2.5
Asset-backed	10.7	6.7	15.5	23.4	2.9
Total	17.3	19.8	36.0	46.3	8.1
Offshore
Financial institutions	26.2	36.5	26.1	33.2	6.1
Non-financial corporates	9.7	11.6	9.4	5.6	1.2
Asset-backed	8.8	14.6	6.4	6.4	1.4
Total	44.6	62.7	41.9	45.2	8.7
Total	61.9	82.5	78.0	91.5	16.9
A$ bond issues by non-resident entities
Onshore	2.6	18.0	22.9	27.2	3.4
Offshore	23.1	18.1	5.4	–2.7	–2.7
Total	25.7	36.1	28.2	24.5	0.7

Source: RBA

..................................................................................................................................

Table 14: Measures of Consumer Prices
Percentage change
	Quarterly		Year-ended

	September quarter 2006	December quarter 2006	September quarter 2006	December quarter 2006

CPI	0.9	–0.1	3.9	3.3
– Tradables	0.8	–1.4	4.4	2.9
– Tradables (ex food and petrol)	0.4	–0.1	0.4	0.8
Non-tradables	1.0	0.8	3.6	3.5
Underlying measures
Weighted median	0.8	0.5	3.2	3.0
Trimmed mean	0.7	0.5	2.9	2.9
CPI ex volatile items^(a)	0.8	0.5	2.6	2.7

(a) Volatile items are fruit, vegetables and petrol
Sources: ABS; RBA

..................................................................................................................................

Table 15: Median Inflation Expectations
Per cent
	Year to December 2007			Year to December 2008


	August 2006	November 2006	February 2007	February 2007

Market economists^(a)	2.6	2.7	2.5	2.5
Union officials^(b)	4.1	3.9	3.5	3.5

(a) RBA survey
(b) Workplace Research Centre

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Table 16: RBA Inflation Forecasts^(a)
Percentage change over year to quarter shown
	Dec 2005	June 2006	Dec 2006	June 2007	Dec 2007	June 2008	Dec 2008

Consumer
price index	2.8	4.0	3.3	1¾	2¼	2½ – 3	2½ – 3
Underlying inflation	2.5	2.9	3.0	2¾	2¾	2½ – 3	2½ – 3

(a) Actual data to December 2006. Underlying inflation refers to the average of trimmed mean and weighted median inflation. For the forecast period, technical assumptions include A$ at US$0.78, TWI at 64, cash rate at 6.25 per cent, and WTI crude oil price at US$60 per barrel.
Sources: ABS; RBA

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