RBA takes ‘wait and see’ approach to monetary policy
The Reserve Bank of Australia (RBA) board members met last week to discuss monetary policy and ruled that staying the course was the best route for the time being.
RBA governor Glenn Stevens issued a statement on September 4, outlining the reasons for the organisation’s decision to hold the official cash rate at 3.5 per cent.
“In Australia, most indicators available for this meeting suggest growth has been running close to trend, led by very large increases in capital spending in the resources sector,” he said.
Governor Stevens referred to increased consumption in the first half of the year – albeit temporary – as a positive sign.
“Labour market data have shown moderate employment growth, even with job shedding in some industries, and the rate of unemployment has thus far remained low,” he added.
Governor Stevens cited comparatively low interest rates and low inflation among supportive reasons for the decision and reasoned that the impact from the previous interest cuts of May and June have not yet been fully realised.
“At today’s meeting, the board judged that, with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate.”
The outcome was criticised by certain industry stakeholders – including the Housing Industry Association (HIA).
HIA chief economist Harley Dale said that the pressing situation of declined residential construction rates needs to be addressed soon with swift action.
“The RBA may have sat on its hands today, but it needs to stand ready to reduce interest rates further,” he said.
Mr Dale added that while the RBA allowed for speculation of possible cuts in the near future, there is no degree of certainty.
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