RBA leaves cash rate unchanged at 1.5%

Peter Trute
(Australian Associated Press)


The Reserve Bank of Australia has left the cash rate unchanged at 1.5 per cent, with the central bank board continuing to worry about weak wages growth .

The RBA board’s decision, announced following its April board meeting on Tuesday, means Australia’s official interest rate has been at a record low for 20 months.

In a statement accompanying the decision RBA governor Philip Lowe said the bank expected an improvement in the national economic growth rate during 2018, with employment and business conditions positive.

However high household debt and weak consumption spending as a result of sluggish wages growth have kept the bank from moving on rates.

“One continuing source of uncertainty is the outlook for household consumption, although consumption growth picked up in late 2017,” Dr Lowe said.

“Household income has been growing slowly and debt levels are high.”

Dr Lowe said despite the improvement in employment around the nation, wages growth was still low but “appears to have troughed”, with reports of some employers now finding it hard to hire skilled workers in some industries.

Dr Lowe noted increased volatility in stock markets as a result of worries about international trade.

Markets have fallen in the wake of US President Donald Trump’s moves to impose new tariffs and quotas but Dr Lowe said financial conditions remain expansionary.

Economists widely expected the RBA to keep rates steady this month and opinions now range from a hike expected at the end of this year – if wages and employment improve faster than expected – or a lift in early 2019.

JP Morgan economist Sally Auld said upcoming retail sales and trade data due out this week would be closely watched by the RBA to ensure the economy is growing in line with its expected 0.8 per cent per quarter.

That rate would require consumption and exports to improve, Ms Auld said, and while she had confidence exports may pick up, the outlook for consumption spending is less positive.

The Australian dollar was at 76.92 US cents at 1620 AEST, from 76.61 cents on Monday.


Like This