RBA interest rate decision: Reserve Bank keeps Australian cash rate on hold – as it happened

Sales fall 0.1% in July, pointing to weaker GDP numbers. This blog has now closed

8.15am BST

It's been a strange day on the markets with very little movement. But the ASX200 has closed the day down 6 points, or 0.09%, at 6,573.4.

In Tokyo the Nikkei has closed up 5 points, or 0.02%, at 20,265.

6.59am BST

It's been quiet on the markets but busy with Australia's central bank keeping rates on hold at 1% despite loud calls for more cuts amid the economy experiencing weak growth. In South Korea, inflation hit zero. Sterling's been hammered again ahead of that vote.

Here are the highlights:

6.34am BST

As Australia debates the need for a rate cut or otherwise, in South Korea the fix is almost certainly in after inflation slumped to zero in the year to August.

Let's take a moment to talk about South Korea lack of inflation - 0% & LOWEST EVER! Core rose 0.9%YoY. Let's not forget that PPI deflated at -0.3%YoY.

Exports are FALLING in double digits (>20% contraction from China demand). Korea needs all the help it can get

Look at that pic.twitter.com/xxRcQl61ku

6.18am BST

The RBA has some supporters.

Brendan Rynne, KPMG chief economist, says the decision is the correct one:

The RBA was right to keep rates on hold at 1% today and leave any further cuts till later in the year. There was no clear reason to cut again yet and with limited ammunition left, the RBA sensibly kept its powder dry.

The RBA sounded a touch more optimistic when it left interest rates on hold today, but we still think that further rate cuts over the coming months are likely.

There is nothing in today's statement which suggests the RBA are keen to cut again anytime soon, despite recent data which suggests another lucklustre quarterly GDP print for 2Q19 and a soggy start to 3Q partial activity data. Accordingly, not much has changed in the commentary; the paragraph on housing has a more upbeat tone, while the narrative around the economy and labour market is largely unchanged from August. As has been the case for a while now, household consumption remains the key domestic risk.

6.04am BST

Back in Australia the judgments on Governor Lowe and his fellow board members are rolling in. Stephen Koukoulas thinks he should be hauled before a parliamentary committee to explain his failure to meet the inflation target.

It's time for Treasurer Frydenberg to haul the RBA before the Parliament and ask WTF they are doing - missing the inflation and full employment targets for such an extended period is a disgrace - many other central banks did it, not the RBA

An over-leveraged consumer who has whittled away their savings and is devoid of any material pick up in wage growth is unlikely to increase discretionary spending particularly given recent consumer sentiment surveys point to rising concerns over the economic outlook #RBA https://t.co/YXankI1oAt

This might be a bit melodramatic but the RBA is fiddling while Rome burns (of course they are still doing better than the federal government who have their head stuck in the sand).

5.59am BST

Stock markets are still subdued:

The ASX200 is down 2 points, or 0.02%, at 6,577.

5.53am BST

Evan Lucas at InvestSmart has done a great job in annotating the governor's statement so you can see the bits that have changed since last month.

He sees the Australian economy growing "from here" so maybe hinting at a more upbeat forecast at some point. He appears more bullish about house prices.

Here are the Change from August to September #RBA #ausbiz pic.twitter.com/xgSTPlBApy

5.44am BST

The Aussie has spiked back up to US67.04c.

5.43am BST

Lowe repeats his view that loose monetary policy will stay for some time.

This is becoming a familar line so we can expect low interest rates to support growth. Lowe says:

It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target.

Key Headlines

* RBA WILL EASY MONETARY POLICY IF NEEDED

* RBA SEES INFLATION A LITTLE UNDER 2% OVER 2020

* RBA: REASONABLE TO EXPECT EXTENDED PERIOD OF LOW RATES

* RBA SAYS SIGNS OF A TURNAROUND IN HOUSING MARKETS

* RBA: LITTLE UPWARD PRESSURE ON WAGES GROWTH

* RBA WILL EASY MONETARY POLICY IF NEEDED
* RBA: REASONABLE TO EXPECT EXTENDED PERIOD OF LOW RATES
* RBA SAYS SIGNS OF A TURNAROUND IN HOUSING MARKETS
* RBA: LITTLE UPWARD PRESSURE ON WAGES GROWTH

5.36am BST

Governor Philip Lowe's statement picks its way carefully through the economic outlook but he notes that the improving housing market could start to help currently very weak consumer spending, along with tax cuts helping disposable income.

The main domestic uncertainty continues to be the outlook for consumption, although a pick-up in growth in household disposable income and a stabilisation of the housing market are expected to support spending.

It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target. The Board will continue to monitor developments, including in the labour market, and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.

5.30am BST

RBA keeps the cash rate at 1%.

5.28am BST

It's coming soon. The chances of a cut in rates at 2.30 is around 15%, according to CommSec analysts. That won't please the Kouk.

5.02am BST

Evan Lucas of InvestSmart is looking at what the RBA might say in its statement after the meeting. He notes that the familiar message of recent months might no longer contain the line about struggling house prices.

We'll have all the reaction to the decision and statement from 2.30pm.

"Economic growth in Australia over the first half of this year has been lower than earlier expected, with household consumption weighed down by a protracted period of low income growth and declining housing prices" dont expect that last comment to remain at 14:30 #ausbiz #RBA

4.48am BST

There has been a lot of debate - as ever - about what the RBA should do today although the consensus is it won't cut the rate.

The outspoken economist Stephen Koukoulas has left no doubt that he is in favour of a rate cut - preferably a whopping big one to reduce the cash rate to 0.25% and boost growth. But he doesn't think the RBA will and he's not afraid to let people know.

To boost growth, Dr Lowe could (should) cut interest rates to near zero but he has a preference to have higher unemployment and lower living standards than needed as he maintains his crusade against house prices and household debt.

Without policy action by the government and the RBA, the economy is likely to remain a chronic under-performer.

Sticking with GDP of 0.7% for tomorrow - about 1.6% annual

4.25am BST

A bit more than an hour before the RBA decision, which we'll bring to you as soon as it happens.

Economists at JP Morgan have been crunching through the July retail sales data and conclude that any consumer-led recovery in the economy in the third quarter still seems a bit of a stretch. They note that shoppers cut back despite two successive rate cuts so they are unlikely to suddenly start spending now.

The RBA cut in early June and July, and July was the first month where it was technically possible for households to have received the 2018/19 low and middle income tax offset. It is still very early days in tracking the disposable income transmission, but the July data represent an unimpressive start.

Most categories were soft in July, with food sales (+0.3%m/m) boosting the headline measure, while clothing/footwear (-1.0%m/m), "other" retailing (-0.4%m/m), cafes/restaurants (-0.6%m/m) and department store sales (-0.2%m/m) were broadly soft. Household goods retailing managed to tread water (-0.1%m/m) but has still had a lackluster run of late.

3.49am BST

It's happened. The Aussie is being crushed by the economic gloom and the strong greenback.

Some think it's only going lower ...

$AUD 0.6699... Not far to go to see USD/AUD hit $1.50

$AUDUSD
The move towards 65 range for completion of A continues apace...mindful of possible slips toward 60 in extensions, though Alternate presently. pic.twitter.com/TfbliJH4Yr

3.38am BST

I was just thinking there should really be an "I love charts" hashtag. And of course there is but it doesn't get much love on Twitter.

But while I'm at it, I also like this chart from Martin North at Digital Finance Analytics @DFA_Analyst with its implication that there may be trouble ahead for the aforementioned balance of payments ...

Australia records first current account surplus in 44 years https://t.co/rHtjPFbtJP pic.twitter.com/w314El4mRa

3.34am BST

I love this chart. Thanks to @JFosterFM

Australia's current account balance over time. Quite an extraordinary chart. #ausbiz pic.twitter.com/l86CdL3Wtv

3.33am BST

The Chinese markets have opened but they are flat like the others this lunchtime.

Shanghai Composite is down 2 points at 2,922, a fall of 0.07%.

3.18am BST

Westpac economists have put out an excellent summing-up of the Australian data.

Andrew Hanlan writes that the boost in government spending and exports means he is sticking to his forecast of a rise of 0.5% in Q2 GDP tomorrow. Government is the key growth driver, he says. But he warns that falling iron ore prices will reduce the contribution of exports in the third quarter and put the spotlight on weak consumer demand.

Government spending (largely centred on health and investment - albeit with quarterly volatility) is the key growth driver. Another positive is the resumption of the export uptrend in the first half of 2019, supported by expanding capacity in the LNG sector and with the lower AUD a boost for services and manufacturing.

By contrast, private demand is contracting - with home building in a downtrend and business investment patchy. Consumer spending is likely soft, constrained by weak wages growth. Import weakness is symptomatic of weak demand, as well as the impact of the lower AUD.

3.12am BST

My colleague Ben Butler brings this depressing news for investors:

More bad news for investors who trust other people to look after their money: most fund managers failed to beat the overall market last financial year, according to new research from S&P Dow Jones Indices.

3.09am BST

Capital Economics reckons that the boost from exports and government spending will be enough to bring GDP in at 0.4% tomorrow. They revised their number down to 0.2% last week after the shocking building approvals but they now say it will be 0.4%.

They say:

In light of the data on net exports, government finances, and business inventories we are raising our estimate for Q2 GDP from 0.2% q/q to 0.4% q/q (actual data due on Wednesday). That would be consistent with annual GDP growth slowing to 1.3% y/y, the weakest pace of growth in nearly 20 years.

3.06am BST

Federal spending might be another factor to save the GDP number from going negative tomorrow.

The ABS said this morning that general government final consumption expenditure increased by $2,365m or 2.7%, and "is expected to positively contribute 0.5 percentage points to growth in the June quarter 2019 volume measure of GDP".

2.56am BST

Cafes and restaurants performed especially badly to drag down retail sales, the ABS says.

2.49am BST

The poor retail sales sent the dollar down again. It fell from US67.10c to US67.00c immediately after the release of the data, before climbing back to US67.04c a few minutes ago.

2.41am BST

On the up side, Australia has recorded its first current account surplus for 44 years.

ABS chief economist Bruce Hockman said: "Six consecutive quarters of goods and services surpluses, broadly commodity driven, have laid the foundation for our first current account surplus in 44 years."

Current Account Balance (June quarter): +A$5.9bn (forecast: +A$1.5bn). First current account surplus in 44 years.
Net exports to add 0.6pp to Q2 GDP. #ausbiz #ausecon

AU retail sales fall 0.1%mom, weaker than 0.2%mom expectation, coming after 0.4%mom outcome in June. Consumer continues to be cautious...#ausbiz pic.twitter.com/3L79N3Ryvc

2.34am BST

Retail sales fell 0.1% in July, according to figures from the Australia Bureau of Statistics.

The number implies weaker than expected GDP figures tomorrow.

2.30am BST

The gloomy prospects for the global economy have pushed the price of a barrel down this morning.

Benchmark Brent crude was was US7 cents lower at $58.59 a barrel. US crude was down 32 cents, or 0.6%, at $54.78.

2.23am BST

The Chinese yuan has been set weaker once again by the People's Bank.

The currency is now notionally fixed at 7.0884 to the US dollar, as opposed to 7.0884 yesterday. But it's likely to drift lower still because it finished the trading day at 7.1717 on Monday (the higher the number the weaker the yuan).

#PBOC cut #yuan's fixing to 7.0884 per USD, vs 7.0883 one day earlier.

2.13am BST

Bond yields are heading ever downwards and bringing the prospect of very low interest rates for years to come. That much we know. (Here's Greg Jericho's very useful primer on the subject.)

Japan has been living with ultra low growth and rates for more than 20 years since the bursting of its property bubble in the 90s andpersistent low population growth. This has given rise to speculation about how other developed nations will cope in this changed environment.

Europe looks like Japan on a few measures, the US doesn't look like Japan on many measures at all, and China lies somewhere in between. China appears to offer the broadest set of potential Japanization trades relative to the US or Europe.

Strong population growth in Australia (1.5%oya at present) makes economic stagnation (and hence deflation) improbable, but doesn't rule out a protracted period of sub-trend growth and sub-target inflation.

1.54am BST

Stock markets have stabilised a bit and overall are flat across the region. The ASX200 is off four points at 6,575, while the Nikkei and the Kospi are up a smidgen. Korean investors might be encouraged by the prospect of another cut in rates after that zero inflation reading.

Let's take a moment to talk about South Korea lack of inflation - 0% & LOWEST EVER! Core rose 0.9%YoY. Let's not forget that PPI deflated at -0.3%YoY.

Exports are FALLING in double digits (>20% contraction from China demand). Korea needs all the help it can get

Look at that pic.twitter.com/xxRcQl61ku

We have so many problems around the world, starting from the US-China trade war and Brexit. But investors appear to be getting used to be exposed to them. No one really thinks Washington and Beijing will solve the issues. But as long as the US economy keeps going, stock prices will have limited downside.

1.33am BST

The Australian dollar has edged lower this morning to US67.11c.

The $AUDUSD remains on a tight range in the 0.6750 -0.6715 level the past few days. Can the battler get any direction from the #RBA interest rate decision today or the #GDP & retail sales numbers out this week?#FX #trading #forex #ausbiz
Losses may exceed deposits pic.twitter.com/Ae5stSHBRl

Expectations for an interest rate cut in Australia today are muted after the back-to-back cuts in June and July. However the inventory component of the national accounts shocked with a 0.9% drop in the second quarter. This has some analysts predicting a negative number when GDP data is released tomorrow, a development that could shift the RBA's thinking. However the stimulatory impact of the lower Aussie should be enough to stay the board's hand today.

1.20am BST

The negative start on the market in South Korea comes after annual inflation hit an all-time low in August of ZERO, figures showed this morning.

That means the Bank of Korea has revised down the economic growth for the April-June period to 1.0% on-quarter from a 1.1% gain reported earlier, citing weaker exports than estimated earlier. Consumer demand is also a worry in Korea.

South Korea inflation falls to ZERO, lowest on record.

Good morning from the Asia Pacific. pic.twitter.com/xX55F2lsuv

1.11am BST

Stock markets across Asia Pacific are open. The ASX200 in Sydney has started the day flat while the Nikkei in Tokyo is down 0.27% and the Kospi in Seoul is off 0.15%.

1.07am BST

As I've just mentioned, the Coalition is in full damage-limitation mode before the possibly terrible GDP figures tomorrow.

My esteemed colleague Greg Jericho has taken his usual forensic look at the state of play and asks why we should be expected to believe the government's claims that a better economy is just around the corner when it's been in charge for six years ...

Related: Scott Morrison's 'improving' economy is on the never-never | Greg Jericho

12.59am BST

Good morning and welcome to our business live blog. It looks set to be a busy day in economics and finance in Australia and around the world, beginning with another slew of data on the Australian economy at 11.30 this morning, followed by the Reserve Bank's latest monthly verdict on the cash rate at 2.30 this afternoon.