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RBA warns against Trump trade restrictions

AAP logoAAP 20/12/2016 Marty Silk

The Reserve Bank has warned of significant adverse impacts on the global economy if US president-elect Donald Trump enacts policies to restrict global trade.

The RBA board left interest rates on hold at an all-time low of 1.5 per cent earlier this month, citing uncertainty about spillover impacts of the proposed policies of the incoming US administration.

"A range of estimates suggested that the plans for fiscal policy could provide a boost to economic activity over the next few years and place some upward pressure on inflation," the minutes, released on Tuesday, said.

"Working in the other direction, however, if policies were enacted to restrict trade, there could be significant adverse effects on the economic outlook in the United States and beyond."

The central bank also admitted domestic wage growth was still undershooting its expectations despite Australia's low unemployment rate of 5.6 per cent.

"The wage price index (WPI) had increased by a little less than expected in the September quarter and year-ended growth in the WPI had eased a little further," the minutes said.

However, the outlook for global inflation wasn't all gloomy as the central bank noted that the downside risks were fading amid the recent surge in commodity prices.

The central bank also noted that housing markets in Sydney and Melbourne had been heating up, with both house price growth and auction clearing rates high.

"Overall, conditions in the established housing market had strengthened over recent months," the RBA board said.

The RBA also said investor housing loan approvals were up noticeably and home loan growth had increased, particularly in NSW.

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