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RESERVE BANK OF AUSTRALIA

Statement on Monetary Policy – February 2007

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

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Table 1: Commodity Prices
Percentage change; SDR
  Three months to
January 2007		 Year to
January 2007
(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
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
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Table 2: Changes in Monetary Policy
  Current level
Per cent		 Most recent
change		 Change since
end 2005		 Expectations for
next 6 months
Sources: central banks; Bloomberg; Reuters
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
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Table 3: Equity Markets
Percentage change
  Since 2000
peak
 Since 2003
trough		 2006 Since previous
Statement
Source: Bloomberg
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
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Table 4: Change in US Dollar against Other Currencies
Per cent
  2006 Since previous
Statement
Source: RBA
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
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Table 5: Australian Dollar against Selected TWI Currencies
Percentage change
  2006 Since previous
Statement
Source: RBA
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
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Table 6: Demand and Output
Percentage change
  June
qtr 2006		 September
qtr 2006		 Year to September
qtr 2006
(a) Contributions to GDP growth
(b) Includes the statistical discrepancy
Source: ABS
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
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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
(a) Seasonally adjusted by the RBA
Sources: APM; REIA; state REIs; RBA; Residex
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
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Table 8: Rental Vacancy Rates
Per cent, seasonally adjusted
  1979–2005
Average
 2006(a)
(a) Estimate based on data for the first three quarters
Sources: RBA; state REIs
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
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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
Source: ABS
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
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Table 10: Interest Rates
Per cent, February 2007
  Cash rate Actual rate on new
housing loans(a)		 Actual
business rate(a)
(a) RBA estimates
Sources: APRA; RBA
Level 6.25 7.45 7.80
Deviation from decade average 1.05 0.80 0.00
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Table 11: Interest Margins and Losses on Housing Loans
Basis points
  2000 2002 2004 2006
(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
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
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Table 12: Financial Aggregates
Average monthly growth, percentage change
  March
quarter
2006		 June
quarter
2006		 September
quarter
2006		 December
quarter
2006
Source: RBA
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
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Table 13: Non-government Net Bond Issuance by Sector
$ billion
Sector 2003 2004 2005 2006
  of which
December
quarter
Source: RBA
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
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Table 14: Measures of Consumer Prices
Percentage change
  Quarterly Year-ended
September
quarter
2006		 December
quarter
2006		 September
quarter
2006		 December
quarter
2006
(a) Volatile items are fruit, vegetables and petrol
Sources: ABS; RBA
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
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Table 15: Median Inflation Expectations
Per cent
  Year to December 2007 Year to December 2008
August
2006		 November
2006		 February
2007		 February
2007
(a) RBA survey
(b) Workplace Research Centre
Market economists(a) 2.6 2.7 2.5 2.5
Union officials(b) 4.1 3.9 3.5 3.5
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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
(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
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
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