Australia’s central bank left its key interest rate unchanged for the third month at 3 percent yesterday, citing a stabilizing global situation and a stronger-than-expected domestic economy.
The Reserve Bank of Australia (RBA) has kept rates at the current level — their lowest in 49 years — since April, but said in a statement there was room for further cuts this year if necessary.
Conditions in global financial markets are improving and action to strengthen balance sheets of key financial institutions is under way, RBA chief Glenn Stevens said in the statement.
“There is tentative evidence that the US economy is approaching a turning point, but conditions in Europe are still weakening,” Stevens said.
Stevens pointed to growth in China as helping regional countries, including Australia.
Stevens said the Australian economy was not as weak as feared, but conditions in credit markets remained tight and wage growth was likely to slow as demand for workers softened, helping to ease inflationary pressures.
“The board’s current view is that the outlook for inflation allows some scope for further easing of monetary policy, if needed,” Stevens said.
He said households were more comfortable thanks to low interest rates and cash handouts from the government in a recent stimulus package, but business conditions remain depressed in the difficult global environment.
The cash rate hit 3 percent in April after the bank slashed it an aggressive 4.25 percentage points since last September in reaction to the global financial crisis.
The announcement came the same day that Australia’s lowest-paid workers were denied a pay raise this year.
The Fair Pay Commission, an independent body that sets federal minimum wages, said the decision was designed to protect jobs and support a stronger employment recovery.