The Reserve Bank of Australia rightly takes a considered approach to economic data.
While markets and the media are sent into a frenzy over small shifts in the dollar or the unemployment rate, RBA officials usually emphasise the importance of interrogating the figures and using an accumulation of information – rather than a single data point – to help assess what exactly is going on in the economy.
Such an approach is understandable – indeed, necessary – when each decision made will directly affect the economic fortunes of more than 23 million people, as well as having significance for the international economy.
Which begs the question – why does the RBA Board meet on the first Tuesday of every month (except January), rather than the Wednesday or – as Outlier suggests – the Thursday.
Many of the major data releases from the Australian Bureau of Statistics, including the national accounts, the consumer price index and the monthly labour market reading, are scheduled for Wednesdays and Thursdays, meaning that often the RBA Board meets without access to the latest ABS figures.
This week was a case in point.
The day after the RBA Board decided to leave interest rates on hold, the national accounts for the March quarter were released, showing gross domestic product increased by just 0.6 per cent in the March quarter, holding the annual growth rate down at 2.5 per cent for the third consecutive quarter.
The result was consistent with the observation made by RBA Governor Glenn Stevens after the Board meeting that growth in the past year had been “a bit below trend” (which is generally considered to be around 3.25 to 3.5 per cent).
But the soft growth number hasn’t helped convince people that the Reserve Bank is right when it says recent rate cuts will help push growth toward 3 per cent next year.
Instead, the growing expectation is that the central bank will have to cut the cash rate further.
All of which makes the RBA Board appear – rightly or wrongly – out of step with developments in the economy.
And, when it comes to monetary policy, appearances matter.
The demeanor of a central bank and what is says can be as influential as what it actually does with the cash rate. Just ask Ben Bernanke, Mario Draghi or Mervyn King.
So, even if having the March quarter national accounts figures at its fingertips would not have changed the decision of the RBA Board on Tuesday, the perception that it made its call without taking into account the most recent national growth data is not helpful for its cause.
If the regular Board meeting was shifted to a Thursday instead of Tuesday, it would mean that it would have access to the most recent data possible when coming to its monthly policy decisions.
And, every three months, it would have access to the latest official growth and inflation figures for its cash rate deliberations.
For the sake of perceptions, this would be reassuring for everyone.