RBA leaves cash rate unchanged, as inflation stays within target
(5 August 2015 – Australia) Australia’s central bank still has its hands tied when it comes to the cash rate, leaving it unchanged at 2.0 percent while the country’s economic growth continues at a low pace.
In a statement following the decision on 4 August, Reserve Bank of Australia (RBA) governor Glenn Stevens said that while Australia’s rate of growth is below longer-term averages, it has been associated with stronger growth of employment and a steady rate of unemployment over the past year.
The RBA Board’s judgement was that overall, the economy is likely to be operating with a degree of spare capacity for some time yet.
“Recent information confirms that domestic inflationary pressures have been contained.
“That should remain the case for some time, given the very slow growth in labour costs.
“Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.”
Stevens said these circumstances call for accommodative monetary policy with low interest rates acting to support borrowing and spending.
The statement said credit is recording moderate growth overall, with growth in lending to the housing market broadly steady over recent months.
Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities.
The Bank is working with other regulators to assess and contain risks that may arise from the housing market.
In other asset markets, prices for equities and commercial property have been supported by lower long-term interest rates.
The Australian dollar is adjusting to the significant declines in key commodity prices.
“Further information on economic and financial conditions to be received over the period ahead will inform the Board's ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.
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