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RESERVE BANK OF AUSTRALIA

Statement on Monetary Policy – August 2008

List of tables

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Chapters

Table 1: World GDP

Table 2: Changes in Monetary Policy

Table 3: Changes in Emerging Market Policy Interest Rates

Table 4: Change in Major Country Share Prices

Table 5: Change in US Dollar against Other Currencies

Table 6: Australian Dollar against Selected TWI Currencies

Table 7: Demand and Output

Table 8: National House Prices

Table 9: Fiscal Balance – General Government Sector

Table 10: Labour Market by State

Table 11: Largest Falls in Australian Equities since 1900

Table 12: Earnings Growth

Table 13: Credit Aggregates

Table 14: Intermediaries’ Variables Lending Rates

Table 15: Measures of Consumer Prices

Table 16: Median Inflation Expectations

Table 17: Output and Inflation Forecasts

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Boxes

Table B1: Monoline Ratings

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Table 1: World GDP
Year-average percentage change(a)
  2006 2007 2008 2009
    IMF forecasts(d)
(a) Aggregates weighted by GDP at PPP exchange rates unless otherwise specified
(b) Weighted using GDP at market exchange rates
(c) Weighted using merchandise export shares
(d) Forecasts from the 18 July World Economic Outlook (WEO) Update
Sources: CEIC; IMF; RBA; Thomson Reuters
United States 2.9 2.2 1.3 0.8
Euro area 2.9 2.7 1.7 1.2
Japan 2.4 2.1 1.5 1.5
China 11.6 11.9 9.7 9.8
Other east Asia(b) 5.5 5.8 4.7 4.8
India 9.8 9.3 8.0 8.0
World 5.1 5.0 4.1 3.9
Australia’s trading partners(c) 5.1 5.4 4.2 4.2
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Table 2: Changes in Monetary Policy
  Current level
Per cent		 Most recent
change		 Expectations for
next 6 months
Sources: Bloomberg; Thomson Reuters; central banks
United States 2.00 ↓ Apr 08 ↑ 25 bps
Euro area 4.25 ↑ Jul 08 No change
Japan 0.50 ↑ Feb 07 No change
United Kingdom 5.50 ↓ Apr 08 No change
Canada 3.00 ↓ Apr 08 ↓ 25 bps
New Zealand 8.00 ↓ Jul 08 ↓ 75 bps
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Table 3: Changes in Emerging Market Policy Interest Rates
  Increase since
previous Statement
Basis points		 Current level
Per cent
Sources: Bloomberg; central banks
Brazil 125 13.00
Chile 100 7.25
Hungary 25 8.50
India 125 9.00
Indonesia 75 9.00
Israel 75 4.00
Mexico 50 8.00
Philippines 75 5.75
Poland 25 6.00
Russia 50 11.00
South Africa 50 12.00
Taiwan 12½ 3.63
Thailand 25 3.50
Turkey 150 16.75
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Table 4: Change in Major Country Share Prices
Per cent
  Since recent
peak		 Since previous
Statement
Source: Bloomberg
United States
– Dow Jones −18 −9
– S&P 500 −18 −7
– NASDAQ −17 −2
Euro area
– STOXX −28 −14
United Kingdom
– FTSE −19 −12
Japan
– TOPIX −30 −8
Canada
– TSE 300 −11 −6
Australia
– ASX 200 −27 −12
MSCI Emerging Asia −30 −18
MSCI Latin America −22 −18
MSCI World −20 −10
– Financials −35 −15
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Table 5: Change in US Dollar against Other Currencies
Per cent
  2007 Year to date Since previous Statement
Sources: Bloomberg; Board of Governors of the Federal Reserve System; Thomson Reuters
Brazil −17 −17 −6
Philippines −-16 −4 3
Canada −14 −1 4
India −11 4 1
Euro area −10 −11 0
Australia −10 −6 3
New Zealand −8 6 9
Switzerland −7 −11 0
China −7 −10 −2
Sweden −6 −9 1
Thailand −6 −1 6
Singapore −6 −9 1
Malaysia −6 −6 3
Japan −6 −8 5
South Africa −2 5 −2
United Kingdom −1 4 0
Taiwan 0 −6 0
South Korea 1 10 −2
Mexico 1 −9 −6
Indonesia 5 −2 −2
Majors TWI −11 −6 2
Broad TWI −8 −6 0
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Table 6: Australian Dollar against Selected TWI Currencies
Percentage change
  Past year Since previous Statement Deviation from post-float average
Sources: RBA; Thomson Reuters; WM/Reuters
South Korea 18 −3 38
New Zealand 13 5 3
South Africa 12 −5 59
United Kingdom 11 −2 6
United States 7 −3 26
Canada 6 0 2
Indonesia 5 −4 138
Taiwan 0 −2 25
Japan −3 0 5
Singapore −3 −1 0
Sweden −3 −2 5
China −3 −5 35
PNG −5 −8 80
Euro area −5 −3 −11
Switzerland −6 −3 −11
TWI 2 −2 19
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Table 7: Demand and Output
Percentage change
  December
quarter 2007		 March quarter
2008		 Year to March
quarter 2008
(a) Adjusted for the statistical discrepancy
(b) Contributions to GDP growth
Sources: ABS; RBA
Domestic final demand 1.4 0.9 4.8
GNE(a) 1.6 1.3 5.6
Net exports(b) −1.0 −0.7 −2.1
GDP 0.7 0.6 3.6
Non-farm GDP 0.6 0.7 3.6
GDP adjusted for changes
in the terms of trade		 0.9 0.8 3.9
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Table 8: National House Prices
Percentage change
  March quarter 2008 June quarter 2008 Year to June quarter 2008
Sources: ABS; APM; RBA; RP Data-Rismark
ABS 0.4 −0.3 8.2
RP Data-Rismark 1.1 −1.5 6.2
APM 0.8 −1.4 6.8
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Table 9: Fiscal Balance – General Government Sector(a)
Estimates, $billion
  2007/08 2008/09
(a) ABS Government Finance Statistics basis
Sources: Australian Treasury; RBA; state Treasuries
General government
Federal government 20.4 23.1
– Per cent of GDP 1.8 1.9
State governments −4.3 −6.2
– Per cent of GDP −0.4 −0.5
Total (federal and state) 16.2 16.9
– Per cent of GDP 1.4 1.4
Public trading enterprises
(capital spending)    
States 20.1 27.2
– Per cent of GDP 1.8 2.3
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Table 10: Labour Market by State
Trend measure, Per cent
  Employment growth Unemployment rate
Year to July 2008 July 2008
Source: ABS
NSW 2.0 4.7
Victoria 1.5 4.6
Queensland 2.7 3.8
WA 2.7 3.3
SA 2.7 4.8
Tasmania 4.1 4.3
Australia 2.3 4.3
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Table 11: Largest Falls in Australian Equities since 1900
  Peak to trough Duration
(per cent) (months)
Sources: ASX; Bloomberg; RBA
1973 −49 22
1929 −45 24
1987 −45 5
1981 −32 11
1970 −31 20
1951 −29 10
2007 −27 8
1937 −26 59
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Table 12: Earnings Growth
Per cent
  Average Analysts’ forecasts
2002/03–2006/07 2007/08 2008/09 2009/10
Sources: RBA; Thomson Reuters
Resources 29 0 49 18
Financials 8 −2 4 7
Other 17 7 2 8
ASX 200 15 1 16 11
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Table 13: Credit Aggregates
Average monthly growth, Per cent
  September
quarter
2007		 December
quarter
2007		 March
quarter
2008		 June
quarter
2008
Source: RBA
Total credit 1.1 1.3 0.8 0.5
Household 0.7 0.9 0.8 0.6
– Owner-occupier housing 0.8 0.9 1.0 0.7
– Investor housing 0.7 0.7 0.7 0.6
– Personal 0.0 1.2 0.0 0.1
Business 1.9 1.8 1.0 0.3
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Table 14: Intermediaries’ Variable Lending Rates
Per cent
  Current level Change since:
6 August 2008 End April 2008 End July 2007
(a) RBA estimate for end of July
Sources: ABS; APRA; RBA
Cash rate 7.25 0.00 1.00
Housing loans
Prime-full doc
Banks 8.98 0.18 1.55
CUBS 8.83 0.17 1.46
Mortgage originators 9.14 0.21 1.76
Prime low-doc
Banks 9.46 0.23 1.70
Mortgage originators 9.79 0.30 1.99
Non-conforming 11.71 0.15 2.09
Personal loans
Margin loans 10.54 0.14 1.57
Standard credit cards 19.66 0.14 1.88
Low-rate credit cards 12.88 0.33 1.72
Unsecured term loans 14.85 0.26 2.23
Small business
Term loans
Residentially secured 10.10 0.24 1.80
Other security 10.69 0.23 1.80
Overdraft
Residentially secured 10.88 0.26 1.94
Other security 11.78 0.26 1.94
Average actual rate(a) 10.21 0.24 1.57
Large business
Average actual rate(a) 9.22 0.15 1.66
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Table 15: Measures of Consumer Prices
Percentage change
  Quarterly Year-ended
March quarter 2008 June quarter 2008 March quarter 2008 June quarter 2008
(a) Volatile items are fruit, vegetables and petrol
Sources: ABS; RBA
CPI 1.3 1.5 4.2 4.5
– Tradables 0.8 1.5 3.3 2.9
– Tradables (ex food and petrol) −0.2 1.1 0.6 1.0
– Non-tradables 1.7 1.4 5.0 5.6
Underlying measures
Weighted median 1.3 1.0 4.4 4.5
Trimmed mean 1.2 1.2 4.0 4.3
CPI ex volatile items(a) 1.2 1.3 3.6 4.2
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Table 16: Median Inflation Expectations
Per cent
  Year to June 2009 Year to June 2010
February 2008 May 2008 August 2008 May 2008 August 2008
(a) RBA survey
(b) Workplace Research Centre
Market economists(a) 2.8 3.0 3.3 2.8 2.8
Union officials(b) 3.5 4.0 4.0 3.5 3.6
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Table 17: Output and Inflation Forecasts(a)
Percentage change over year to quarter shown
  Dec
2007		 Mar
2008		 June
2008		 Dec
2008		 June
2009		 Dec
2009		 June
2010		 Dec
2010
(a) Actual GDP data to March 2008 and actual inflation data to June 2008. Underlying inflation refers to the average of trimmed mean and weighted median inflation. For the forecast period, technical assumptions include A$ at US$0.91, TWI at 70, cash rate at 7.25 per cent, and WTI crude oil price at US$118 per barrel and Tapis crude oil price at US$122 per barrel.
Sources: ABS; RBA
GDP 4.3 3.6 2¾ 2 2¼ 2½ 2½ 2¾
Non-farm GDP 4.2 3.6 2½ 1½ 1¾ 2½ 2½ 2¾
CPI 3.0 4.2 4.5 5 3¾ 3¼ 3 2¾
Underlying inflation 3.6 4.2 4.4 4½ 3¾ 3¼ 3 2¾
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Table B1: Monoline Ratings
  Market share 2007 Current
Per cent S&P Moody’s Fitch
Sources: Fitch; Moody’s; RBA; Standard & Poor’s
MBIA 37 AAA AA A2 –
Ambac 25 AAA AA Aa3 –
FSA 17 AAA AAA Aaa AAA
FGIC 11 AAA BB B1 CCC
XL/Syncora 9 AAA BBB− B2 CCC
Assured 1 AAA AAA Aaa AAA
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