Australia’s central bank held interest rates at their record 2.50 percent low yesterday, adopting a wait-and-see approach as the dollar adjusts and earlier cuts boost confidence.
The Reserve Bank of Australia kept rates on pause for a second consecutive month, as expected, after a series of cuts designed to stimulate the economy as its decade-long Asia mining splurge cools.
Reserve Bank Governor Glenn Stevens said the bank’s board judged “the setting of monetary policy remained appropriate” at its monthly meeting for this month, with the full effects of earlier moves “still coming through, and will be for a while yet.”
Globally, growth was running “a bit below average this year, with reasonable prospects of a pick-up” next year, Stevens said.
“The [Australian] economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment,” Stevens said. “There has been an improvement in indicators of household and business sentiment recently, though it is too soon to judge how persistent this will be.”
Stevens said the Australian dollar was about 10 percent lower than it had been in April but “a lower level of the currency than seen at present would assist in rebalancing growth in the economy.”
Unemployment has edged up to 5.8 percent, its highest level in four years and the worst labor market reading since the financial crisis, while inflation was a muted 0.4 percent in the second quarter.
Borrowing remained “relatively subdued,” but Stevens said there was “continuing evidence” that lower yields on savings were driving consumers back towards spending.
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