Australia Monetary Policy


RBA stays put for second consecutive meeting

At its 2 July meeting, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 2.75%, in a decision in line with market expectations. The move marks a second consecutive meeting in which the RBA remains on hold following a 25 basis points rate cut in May that brought the policy rate to a historic low.

The RBA expects that economic activity at a global level will be below average this year. That said, the Bank considers that there are "reasonable prospects" of a pick up over the next. At a domestic level, growth was below trend in recent months and it is expected to remain sluggish in the near term "as the economy adjusts to lower levels of mining investment". Regarding price developments, the RBA explained that inflation is in line with the Bank's target and is expected to stay consistent with it over the next one or two years.

The RBA believes that further impact from the earlier monetary easing - which is already beginning to show positive effects - will surface in the coming months. On that respect, the RBA maintains that the recent depreciation of the Australian dollar (AUD) will "help to foster a rebalancing of growth in the economy". According to monetary authorities, however, the AUD still remains at high levels.

The Bank insists that easier financial conditions will contribute to stronger growth in the coming months. In addition, the subdued inflation outlook provides room for further easing in the coming months to stimulate demand. FocusEconomics Consensus Forecast panellists 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 July 2013

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

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