Australia Monetary Policy


RBA keeps rates on hold in September

The Reserve Bank of Australia (RBA) left the cash rate unchanged at the historic low of 2.50% at its 3 September meeting, in a decision broadly expected by the market.

The RBA sees below average global economic activity this year, but expects a pick-up next year. At the domestic level, output is running below trend and the RBA indicated that it is expected to remain sluggish in the near term, "as the economy adjusts to lower levels of mining investment." Regarding price developments, inflation remains in check; it is currently in line with the Bank's target and is expected to remain so, "over the next one or two years." Moreover, a moderation in labor costs on the back of a slowdown in the economy will contribute to outweighing the inflationary impact of the Australian dollar's (AUD) recent depreciation.

In that respect, the RBA appears to not be worried about the weakening of the Australian currency. Monetary authorities believe that the AUD is still trading "at a high level" and that a further depreciation in the currency will help rebalance the economy by moving away from the dependence on the mining industry and on commodity exports.

Against this backdrop, FocusEconomics Consensus Forecast panelists expect the cash rate to end 2013 at 2.92% and to rise to 3.38% by the end of 2014.

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Australia Monetary Policy Chart

Australia Monetary Policy September 2013

Note: RBA Cash Rate in %.
Source: Reserve Bank of Australia (RBA).

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