Menu
Business

RBA leaves Rates on hold at 2.5% again

Kieran Salsone

THE RBA has today decided to leave the cash rate on hold at 2.5 per cent.

Their full decision is below.

Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth. China's growth remains generally in line with policymakers' objectives, though it may have slowed a little in early 2014. Commodity prices have declined from their peaks but in historical terms remain high.

Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago.

In Australia, the economy grew at a below trend pace in 2013. Recent information suggests slightly firmer consumer demand over the summer and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have improved from a year ago and exports are rising. But at the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans. Public spending is scheduled to be subdued.

The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. It will probably rise a little further in the near term. Growth in wages has declined noticeably. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth is slowly picking up. Dwelling prices have increased significantly over the past year. The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards.

Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time. Inflation is expected to be consistent with the 2-3 per cent target over the next two years.

In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

Topics:  cash rate interest rates rba



UPDATE: Bruce Hwy reopened, trains restarted after bush fire

FILE PHOTO: Dave Hodgson from Mount Maurice Rural Fire Brigade in 2011.

The fire caused significant smoke across the highway.

MODEL SEARCH: Could you be the next face of Gladstone?

WORTHY CAUSE: The 'RACQ 2018 Face of Gladstone' competition will be held at the Grand Hotel tonight from 5pm.

Model search will raise spirits - and funds - for a good cause.

McCosker's purr-fect solution to a muddy problem

APPRECIATIVE: Betty Bridge with cat Pixie, 10 months, has recently had her driveway fixed by McCosker's.

No more muddy prints on the floor for kennel volunteers.

Local Partners