The Reserve Bank of Australia has left official interest rates on hold at 3% as evidence mounts that the global economy is on the path to recovery.
RBA Governor Glenn Stevens said in a statement that evidence is beginning to emerge that the global economy is stabilising, but Australia is still suffering.
“The Australian economy has been contracting. Capacity utilisation has fallen back to about average levels, and will decline further over the rest of the year.”
“Monetary policy has been eased significantly. Market and mortgage rates are at very low levels by historical standards. Business loan rates are below average. Much of the effect of this is yet to be observed.”
“Nonetheless, the prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed.”
The RBA has slashed rates from 7.25% to 3% since September last year in an effort to kick start the economy.
Macquarie Bank interest rate strategist Rory Robertson said earlier today that rates are likely to be on hold until August or September.
“I think it will be particularly bad news on full-time employment and rising unemployment that ultimately forces the Reserve Bank to cut a bit further,” he told ABC news.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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