Australia Holds Cash Rate Steady at 1.75%


The Reserve Bank of Australia left the cash rate unchanged at a record low of 1.75 percent during the meeting held on July 5th, as expected. While saying that domestic demand, as well as exports, had been expanding at a pace at or above trend, policymakers await further data to assess its next move.

Excerpt from the statement by Glenn Stevens, Governor:

In Australia, recent data suggest overall growth is continuing, despite a very large decline in business investment. Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend. Labour market indicators have been more mixed of late, but are consistent with a modest pace of expansion in employment in the near term.

Inflation has been quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.

Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend and credit growth has been moderate. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.

Indications are that the effects of supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. Dwelling prices have risen again in many parts of the country over recent months. But considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities.

Over the period ahead, further information should allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate.

Australia Holds Cash Rate Steady at 1.75%


RBA l Rida Husna | rida@tradingeconomics.com
7/5/2016 7:52:00 AM