2017 April- RBA leaves cash rate unchanged at 1.5%

http://www.rba.gov.au/media-releases/2017/mr-17-07.html

The RBA left the cash rate at 1.5% at its April meeting, due to the following reasons:

  • Conditions in the global economy have improved, with both global trade and industrial production picking up. Growth in China, our largest trading partner, is being supported by higher spending on infrastructure and property spending – however medium term risks to Chinese growth remain due to heavy amounts of borrowing to finance this growth. These improvements have contributed to higher commodity prices, which are raising our terms of trade and boosting Australia’s national income.
  • These higher commodity prices have been reflected in part by higher inflation rates globally. Although long-term bond yields remain, in a historical context, low, they are higher than last year. Monetary easing has begun to slow in major economies, with the federal reserve having increased interest rates in the USA.
  • Measures of business confidence are at or above average, with non-mining business investment having risen over the past year.
  • The unemployment rate has increased and employment growth is modest. Wage growth still remains slow.
  • Depreciation of the exchange rate since 2013 has assisted the economy in its transition following the mining investment boom. By keeping the interest rate at 1.5% it reduces overseas demand for Australian dollars and prevents, if to a small extent, appreciation.
  • Due to the subdued growth in labour costs, inflation will be expected to only rise gradually. It currently remains quite low at 2%.
  • Growth in household borrowing continues to outpace growth in household income. The announcement of stricter lending standards should address risks associated with high and rising levels of indebtedness. These include ensuring lenders are using serviceability metrics that are appropriate for current conditions. A reduced reliance on interest-only housing loans in the market would also be a positive development.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s