(22 November 2012 – Australia) On the same day the Reserve Bank of Australia (RBA)’s November meeting minutes were released, governor Glenn Stevens hinted at future interest rate cuts.Speaking at the Committee for Economic Development of Australia in Melbourne on Tuesday, Stevens reiterated that future changes to the cash rate had not been ruled out.
‘The board felt that further easing might be required over time,’ he said.
‘It was also conscious, though, that a significant easing of policy had already been put in place, the effects of which were still coming through and would be for a while.
‘In addition, the latest inflation data, while not a major problem, were a bit on the high side, and the gloom internationally had lifted just a little. So it seemed prudent to sit still for the moment.’
Stevens told the committee that domestic data, particularly for growth and inflation would provide guidance on future moves.
Speaking of longer-term trends, he said Australia’s economy was in transition, as terms of trade fell from historic highs, and the resources sector moved into another stage.
‘The terms of trade have peaked, and will probably have fallen by about 15 per cent by the end of this year,’ he said.
‘So, while a high level of the terms of trade continues to add to the level of national income, we can no longer expect that a rising terms of trade will be adding to growth in living standards.’ Talk of an end to the mining boom was ‘somewhat overhyped’, he said.