Nov 7, 2012

RBA keeps interest rate unchanged at 3.25%

The Reserve Bank decided to keep interest rates on hold this afternoon, despite economists' expectations that it would cut the official cash rate by 25 basis points.

In a statement, governor Glenn Stevens said growth is growing close to trend, and noted that interest rates have declined to below medium-term averages – and the world outlook has improved.

About the RBA"While the impact of these changes takes some time to work through the economy, there are signs of easier conditions starting to have some of the expected effects."

"Business demand for external funding has increased this year, the housing market has strengthened and share prices have risen in line with markets overseas," he said.

Stevens also noted the exchange rate remains higher than expected, especially given the weaker global outlook.


But he also noted the peak in resource investment is likely to occur next year, and that as this approaches, the board will be monitoring the industry's strength. Nevertheless, he said, there are signs of continuing growth.

"Some of the consumption strength in the first half of 2012 was temporary, but there have been some signs of ongoing growth, though a return to very strong growth in consumption is unlikely."

"While investment in dwellings has been subdued for some time, over recent months there have been some indications of a prospective improvement. Non-residential building investment has remained weak. Public spending is forecast to be subdued."

With prices data slightly higher than expected, and the outlook on the world stage more positive, Stevens said the board decided the current monetary policy would be appropriate.

Extracted from Smart Company.

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