International Economic Conditions from the Previous Mintues 5th October 2010 Minutes of the Monetary Policy Meeting of the Reserve Bank Board
Sydney - 5 October 2010
On balance, recent data on the global economy had been broadly in line with expectations. The central scenario remained for the world economy to continue to grow at around trend pace over the next year or so, with growth expected to remain relatively strong in the emerging economies but subdued in most of the large advanced economies.
In Asia, growth had eased from the very rapid pace recorded in the second half of 2009 and the early part of this year. While export growth across much of the region had been weak over recent months, indicators of domestic demand had remained firm.
In China, the data for August had mostly been stronger than for June and July. Household spending remained strong; members noted the significant increase in passenger vehicle sales, which had continued to rise even following the partial unwinding of the incentives that had been in place in 2009. Members noted there were signs that the cooling of the Chinese residential property market may have run its course, with turnover increasing after the earlier sharp falls, though prices had remained broadly flat. Members observed that the authorities had recently announced a number of new measures to reduce the flow of lending for housing, especially for investment properties.
Growth appeared to be slowing in Japan. Activity was continuing to expand in the other higher-income economies in Asia; retail sales were growing strongly and employment was expanding. Property markets had also been strong in a number of these economies, most notably Hong Kong, Singapore and Taiwan; this reflected real interest rates that were very low, and in some cases negative, despite the strong economic growth in the region. Policy-makers in these economies had also responded by tightening credit for housing.
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