• Australia central bank keeps rates unchanged

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    SYDNEY- Australia’s central bank held interest rates at a record low of 1.50 percent Tuesday despite a recent run of soft economic data but weak inflation figures kept the door open for future cuts.

    The Reserve Bank of Australia has cut rates by 300 basis points since November 2011 to support growth in non-resources industries as the economy transitions out of a mining investment boom that has helped the nation avoid a recession for a quarter of a century.

    Recently appointed RBA governor Philip Lowe said “the board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”.

    The Australian dollar was little changed after the announcement, buying 74.50 US cents.

    The last rate decision of the year came a day ahead of the release of July-September growth data.

    The economy grew 3.3 percent on-year in the previous three months, boosted by government spending, but is tipped to fall to an annual reading of just above 2.0 percent after a recent run of weak figures and declining business investment.

    “It seems to us that they will look through a weak quarter-three GDP print, because they mention some slowing in year-end growth is likely before it picks up again,” National Australia Bank chief economist for markets Ivan Colhoun told AFP.

    “So they are implicitly saying that that is likely to be transitory and it may reflect the economic transition that is going on… there’s no real signs anywhere the RBA is close to moving rates anytime soon.”

    Inflation continues to disappoint, with core prices rising just 1.3 percent in the September quarter, well off the RBA’s target range of 2.0-3.0 percent.

    Economists have also warned of underemployment despite the jobless rate sitting at a healthy 5.6 percent in October but the recent rise in commodity prices “are providing a boost to national income”, Lowe added.

    The central bank acknowledged the housing market had strengthened, with prices in some regions “rising briskly”. A booming property sector previously saw the Reserve Bank reluctant to ease rates further owing to concern it could lead to overheating.

    The RBA’s board next meets in early February, two weeks after the release of fourth-quarter inflation figures.
    AFP

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