On the face of it, this was a very neutral meeting. The cash rate was kept at 0.10% as expected. The QE program is set to remain at $4 billion per week until mid-February 2022. Furthermore, the RBA noted that the Omicron variant is a new ‘source of uncertainty’, but it is not expected to derail the recovery. The economy is expected to return to its pre-Delta path in the first half of 2022.

The message

The message that stood out was that this was a meeting with very few negative points in. Yes, there is uncertainty noted and the framework for progress is still some time from being achieved (see below for what that is). However, its neutrality is in itself a message. Things are turning around for Australia and the RBA are now firmly focused on recovery.

What the recovery needs to look like

The RBA is very focused on the jobs market and, in particular, wages. The RBA stated that ‘the Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently. This is likely to take some time and the Board is prepared to be patient’.

Unemployment

The RBA expressed uncertainty about the behaviour of wages as the unemployment rate declines to historically low levels, so bear that concern of theirs in mind. The next unemployment data print will be next week. If Omicron fears fade and Australian labour data picks up then the AUD may be well placed for recovery. Note the positive comment by long term RBA watcher McCrann. In particular, the AUDJPY pair looks liable for extra gains.