On November 01, 2016, the Reserve Bank of Australia (RBA) conducted a meeting and decided to maintain the cash rate at 1.50 per cent. The key highlights of the commentary by the Governor, Philip Lowe, included the following:
Global Economic Scenario: China is now witnessing steadiness in economic conditions while the global economy is continuing to grow at a slower than expected rate.
Inflation Scenario: Inflation has been below most central banks’ targets at the global level. Inflation remains quite low in Australia as well and the September quarter inflation data revealed underlying inflation continuing to be around 1½ per cent. Inflation is expected to remain low at the back of subdued growth in labour costs and low cost pressures at the global level.
Cash Rate (Source: Reserve Bank of Australia)
Status of Australia’s other Key Economic Indicators: Australia has lately witnessed a big slip in mining investment which has been nevertheless offset by growth in other areas, including residential construction, public demand and exports. With part-time employment growing strongly, the labour market indicators have been mixed while the unemployment rate has declined this year but variations are seen in employment growth across the country. On the other hand, Australian terms of trade have received support from rebounding commodity prices in the recent months. Then, there has been a sluggishness over the past one year with regard to the turnover in the housing market and growth in lending for housing.
Overall, the forecasts for growth and inflation more or less commensurate with earlier statements delivered by the RBA in the month of August 2016 but with a slight upbeat tone. Further, RBA’s stance is, in a way, indicative of the intention to first monitor trends in labour market, housing market, commodity prices etc. before easing the monetary policy further.
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