Australian central bank keeps rate cut up sleeve, sees more stable global economy

The Reserve Bank of Australia kept its cash rate unchanged at 3 percent as expected, while saying it has room to ease further if needed in the face of tame inflation and noting more stability in the global economy.

"The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand," Governor Glenn Stevens said in a statement.

Inflation is consistent with the bank's medium-term target of about 2.25 percent, he said. A softening labour market and businesses focusing on lifting efficiency under conditions of moderate demand growth "should help to keep inflation low, even as the effects on prices of the earlier exchange rate appreciation wane."

The Australian dollar climbed to $1.0232 after the statement from $1.0212 immediately before. The kiwi dollar rose to 82.92 Australian cents from 82.84 cents.

Australian economic growth was "close to trend" in 2012, with very large increases in capital spending in the resources sector offset by weaker conditions elsewhere in the economy, Stevens said. He reiterated his view that the peak in resources spending is approaching.

Private consumption is growing though not at the very strong pace of previous years. Investment outside the resources sector is relatively subdued. There are signs the housing market is slowly improving with higher prices and improved rental yields.

By contrast, public spending remains constrained, he said.

Global growth is forecast to be "a little below average for a time" but with reduced downside risks, he said. The US economy is growing moderately, financial strains in Europe have reduced and growth in China has "stabilised at a fairly robust pace," he said.

(BusinessDesk)