RBA leaves official cash rate unchanged
At its meeting today the Board decided to leave the cash rate unchanged at 3.0 per cent.
Statement by Glenn Stevens, Governor Monetary Policy RBA
The global economy contracted further during the first few months of this year. While the near-term outlook remains weak, there are further signs of stabilisation in several countries. The Chinese economy in particular has picked up speed in recent months and many commodity prices have firmed a little. The considerable economic policy stimulus in train in most countries should help contain the downturn and support an eventual recovery.
Conditions in global financial markets remain generally on a path of gradual improvement, with equity prices off their lows, term spreads declining and capital markets re-opening. Nonetheless, confidence remains fragile and balance sheets are under pressure from the effects of economic weakness on asset quality. Credit remains tight. Continued progress in restoring balance sheets remains essential to durable recovery.
Australian markets have seen a decline in term spreads and firmer equity prices over recent months. Borrowing for housing is picking up, particularly among first-home buyers. Business borrowing, on the other hand, is declining, as companies curtail investment plans and seek to reduce leverage, in an environment of tighter lending standards.
Monetary policy has been eased significantly. Market and mortgage rates are at very low levels by historical standards and business loan rates are below average, reducing debt-servicing burdens considerably. Much of the effect of these changes is yet to be observed. The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead.
In assessing whether further reductions in the cash rate are required over the period ahead, the Board will monitor how economic and financial conditions unfold, and how they impinge on prospects for a sustainable recovery in economic activity.
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