Australia holds rate as economy continues to improve
Australia’s central bank left its benchmark cash rate steady at 1.50 percent, as expected, with today’s policy statement largely mirroring its views from its previous statement from May.
The Reserve Bank of Australia (RBA), which has maintained its rate since cutting it in August 2016, again said the depreciation of the Australian dollar since 2013 had helped the economy in its transition after the end of a boom in mining investment.
”An appreciating exchange rate would complicate this adjustment,” the RBA said, echoing its recent view.
The Australian dollar, known as the Aussie, fell sharply in 2014 and 2015 but has been largely trading sideways since early 2016.
Today the Aussie was trading at 1.34 to the U.S. dollar, up 3.7 percent since the start of this year, but still well below par to the U.S. dollar that was seen from 2011 to early 2013.
The RBA said the broad-based pick-up in the global economy was continuing, with the rise in commodity prices providing a boost to Australia’s income. Avrise in the prices of iron ore and coal, however, has eased in recent months.
Australia is a major exporter of iron ore, coal, gold, crude oil and natural gas, with the rise in prices in the last year, following a slump in 2014, improving its export earnings.
Business conditions in Australia have continued to improve, with higher capacity utilization and economic growth is still expected to rise gradually over the next couple of months to a bit over 3 percent, the RBA said.
Australia’s Gross Domestic Product grew by an annual rate of 2.4 percent in the fourth quarter of last year, up from 1.9 percent in the previous quarter but down from 3.1 percent in the second quarter.
There are signs that some of the recent sharp rise house prices in parts of Australia are starting to ease, the RBA said, adding that a “considerable additional supply of apartments” is expected to come on stream in coming years and rent increases are now the slowest for two decades.
However, growth in housing debt has outpaced the slow growth in household income, the central bank cautioned, adding that some lenders have raised their mortgage rates and recent supervisory measures should help tackle some of the risks from high and rising debt.
Last month the RBA governor warned borrowers that interest rates were not going to remain at their current record low levels forever and households should be prepared for an increase in rates “at some point.”
The Reserve Bank of Australia issued the following statement:
“At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
Source: http://www.centralbanknews.info/2017/06/australia-holds-rate-as-economy.html
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