The Reserve Bank has decided to keep the official interest rate at the historic low of 2.5%, in line with economists’ expectations.
The announcement comes just after the Bureau of Statistics revealed solid retail sales data for August, and separate but similarly positive property price results from RP Data. The positivity gives the Reserve Bank more room to raise rates if conditions improve.
In a statement by governor Glenn Stevens, the board said financial conditions remained accommodative although changes in the outlook for US monetary policy have increased volatility.
“The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values. The full effects of these decisions are still coming through, and will be for a while yet,” he said
“The pace of borrowing has remained relatively subdued to date, though recently there have been signs of increased demand for finance by households. There is also continuing evidence of a shift in savers’ behaviour in response to declining returns on low-risk assets.”
Stevens also said the dollar remains about 10% below its level in April, stating a lower level would assist in “rebalancing growth”.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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