(19 December 2012 – Australia) The December cash rate cut by the Reserve Bank of Australia (RBA) was to boost non-mining sectors within the economy according to the minutes released on Tuesday.The 4th of December board meeting minutes show the central bank was concerned industries away from the mining boom continued to struggle.
According to the minutes, the RBA board also believed the soft jobs market and slower wage growth meant a rate cut was unlikely to cause a blowout in inflation.
‘At the meeting, the information on labour costs and softening labour market conditions suggested the inflation outlook still afforded the board some scope to provide additional support to demand,’ the RBA minutes said.
‘Further confirmation that the peak in resource sector investment was near, and that the short-term outlook for non-resources investment remained subdued, indicating there was a case for the board to provide that support.’
The central bank is attempting to ensure non-mining sectors of the economy pick up in 2013 to compensate for the slide in mining investment following the peak of the boom.
In the minutes, the RBA said lending rates were now below their medium term average, which was beginning to have a positive effect on the economy.
‘Some of the expected effects were starting to be observed and further effects could be anticipated over time,’ the RBA said.