RESERVE LEAVES RATES ON HOLD: Here's What You Need To Know

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The Reserve Bank of Australia today left the country’s official cash rate at 3%, as expected. Here’s a summary of the board’s rationale from RBA governor Glenn Stevens:

  • While global economic growth is going to be a little below average for a while, the downside risk appears to be reduced as well. Things aren’t great in Europe, but the US is growing and China has stabilised at a fairly robust pace. And while commodity prices are down, they’re still relatively strong.
  • Interest rates for highly-rated countries like Australia are very low. Borrowing conditions for big companies are also good.
  • The peak in resources investment, otherwise known as the “mining boom”, is getting closer. But there is scope for other sectors to pick up the slack.
  • Recent information suggests moderate growth in private consumption spending, though a return to the very strong growth of some years ago is unlikely.
  • Businesses are still trying to lift their efficiency levels, as labor costs are constrained. This should keep inflation down.
  • Monetary policy during late 2011 and early 2012 looks like it has helped to expand the economy and it will probably could keep getting better.
  • The exchange rate, which has risen recently, remains higher than might have been expected, considering export prices have gone down.

Read the full statement here.

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