1300 622 278
News Articles
RBA holds rate for 5th month in a row
RBA holds rate for 5th month in a row
2 September 2009
For the 5th consecutive month in a row, the RBA has held the cash interest rate unchanged at 3.0 per cent following a board meeting yesterday, 1st September 2009.
The Global economy is resuming growth, with major economies approaching a turning point following considerable worldwide economic policy stimulus. In particular, the strong growth in China is having significant impact on other economies in the region and on commodity markets.
However, recent observers expect only modest growth in the economy in 2010, due to the continuing legacy of the GFC.
There is greater confidence in Australia’s economic conditions, which held stronger than forecast, due to consumer spending, exports and business investment holding resilience. Various policy initiatives are thought to have brought forward spending, however this may soften in the near term. Glenn Stevens, Governor of Monetary policy says that “some types of capital spending are also likely to be held back for a while by financing constraints”. Overall, this indicates expected weak investment outlooks for the year ahead may not arrive. “Public demand and higher dwelling activity will also start to provide more support to spending soon and, hence, growth is likely to firm going into 2010”, Stevens said.
Good news as well in unemployment figures. At this point, unemployment has not rises as far as expected. Stevens suggests that “weaker demand for labour, evident in a decline in hours worked, has seen a moderation in labour costs.” Assisted by this and the earlier fall in energy and commodity prices, “inflation has been declining, though measures of underlying inflation remained higher than the target on the latest reading. Underlying inflation should continue to moderate in the near term, but the likelihood of inflation being persistently below the target now looks low” he concluded.
Overall, credit growth remains quite modest, yet housing credit has been strong and dwelling prices have risen over recent months. On the other hand, business borrowing is continuing to decline, as companies have “sought to reduce leverage in an environment of tighter lending standards”. Stevens states, “Large firms have had good access to equity capital and access to debt markets appears to be improving, helped by the better-than-expected economic conditions and increased willingness on the part of investors to accept risk”.
The RBA Board has stated that for the time being, the present accommodative setting of monetary policy remains appropriate. The RBA Board will continue to adjust monetary policy so as to further “sustainable growth in economic activity and inflation consistent with the target”.
*Data as at 1st September 2009. Source: Reserve Bank of Australia Website: www.rba.gov.au/MediaReleases/2009/
Questions?
If you have any questions, please contact us 
