Reserve Bank of Australia cuts interest rates
The kiwi dollar rose to just above AU96c against the RBA's decision
Australia’s central bank has opted to cut its official interest rates by 0.25 basis points to 1.5%, citing stubbornly low inflation.
Reserve Bank of Australia (RBA) governor Glenn Stevens says the global economy is continuing to grow, albeit at “lower than average pace.”
He says actions by Chinese policymakers are supporting the near-term growth outlook for the country but the underlying pace of China's growth appears to be moderating.
Chinese GDP came in at 6.7% year-on-year last quarter.
Although Mr Stevens says commodity prices have bounced recently, this follows substantial declines over the past couple of years.
The RBA governor also points to Australia’s terms of trade as an issue, saying it remains “much lower than it has been in recent years.”
But he was optimistic about Australia’s economic health.
“In Australia, recent data suggests overall growth is continuing at a moderate pace, despite a very large decline in business investment,” he says.
“Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend.”
He says labour market indicators continue to be somewhat mixed but are consistent with a modest pace of expansion in employment in the near term.
Although, Mr Stevens sounded yet another warning about inflation.
“Given the subdued growth in labour costs and very low-cost pressures elsewhere in the world, this is expected to remain the case for some time,” he says.
In terms of housing, Mr Stevens says the most recent information suggests that dwelling prices have been rising only moderately over the course of this year and Growth in lending for housing purposes have slowed a little this year.
All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished.
He did not indicate another cut was on the way and the kiwi dollar rose to just above AU95.6c
Follow NBR on Facebook, Twitter, LinkedIn and Instagram for the latest news and free on-demand audio from NBR Radio.
Jason Walls
Tue, 02 Aug 2016
Tue, 02 Aug 2016
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Reserve Bank of Australia cuts interest rates
60428