The Reserve Bank Board today left the cash rate unchanged at 1.50%. For full details, please refer to the Statement by Philip Low or contact us to discuss your financial planning needs. Key points from the media release include:
- Conditions in the global economy are continuing to improve. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy is being supported by increased spending on infrastructure and property construction, with the high level of debt continuing to present a medium-term risk.
- Wage growth remains low in most countries, as does core inflation. Headline inflation rates are generally lower than at the start of the year, largely reflecting the earlier decline in oil prices.
- The Bank’s forecasts for growth in the Australian economy are largely unchanged. The central forecast is for GDP growth to pick up and to average around 3 per cent over the next few years.
- The labour market has continued to strengthen. Employment has been rising in all states and has been accompanied by a rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead. The unemployment rate is expected to decline gradually from its current level of 5½ per cent.
- Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. In underlying terms, inflation is likely to remain low for some time, reflecting the slow growth in labour costs and increased competitive pressures, especially in retailing.
- The Australian dollar has appreciated since mid year, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to continued subdued price pressures in the economy. It is also weighing on the outlook for output and employment.
- Growth in housing debt has been outpacing the slow growth in household income for some time. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures. Credit standards have been tightened in a way that has reduced the risk profile of borrowers. Housing market conditions have eased further in Sydney. In most cities, housing prices have shown little change over recent months, although they are still increasing in Melbourne. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities.
- The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.