Australia: RBA keeps rates unchanged as economic outlook improves
April 2, 2013
At its 2 April meeting, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 3.00%, in a decision largely anticipated by market analysts.
According to RBA, economic activity at a global level will remain below average for some time, although downside risks appear now to be reduced. Moreover, commodity prices - in particular those relevant to Australia - remain at historically high levels, despite having moderated recently.
At a domestic level, the RBA maintains its view that the peak in resources investment is approaching. Other sectors of economic activity are seen as picking up over the next year. Positive developments are seen in dwelling investment, amid increasing dwelling prices, and in natural resources exports. The Bank expects inflation to remain consistent with the target over the next one or two years, as contained labour costs and business efforts to improve efficiency are expected to keep inflation low.
According to the RBA, early signs of the impact of the monetary easing operated over the course of 2012 are beginning to show in the real economy. Monetary authorities also believe that "further such effects can be expected to emerge over time". Against this backdrop, the RBA deems the current policy stance as appropriate. The Bank, however, maintained a dovish stance, stating that "the inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand". FocusEconomics Consensus Forecast panellists expect the cash rate to end 2013 at 2.87% and to rise to 3.50% by the end of 2014.
Author: Armando Ciccarelli, Head of Data Solutions