Australia keeps rates on hold at 2.5%

Tuesday 01 April 2014 08.33
Australian rates on hold as tentative signs show that the non-mining economy is improving
Australian rates on hold as tentative signs show that the non-mining economy is improving

Australia's central bank today kept interest rates at a record low 2.5% for a seventh board meeting in a row amid only tentative signs that the non-mining economy is improving.

The central bank indicated a "period of stability" in the cash rate as the commodity-powered nation's transition away from its reliance on the mining sector struggles to take hold.

"In the board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target," the bank said in a statement that was similar to a month ago.

Governor Glenn Stevens said consumer demand had firmed "slightly", on the back of a solid expansion in housing construction. 

Business conditions and confidence had also improved and exports were rising, he noted.

But at the same time, resources sector investment spending was set to decline significantly.

"At this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans," he said.

Public spending was also set to be subdued while the unemployment rate - currently at 6% and already the highest in a decade - was expected to rise "a little further in the near term".

Looking ahead, Stevens said "continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time". 

"Inflation is expected to be consistent with the 2-3%t target over the next two years," he added.

Most economists saw nothing in the latest comments from the RBA to change their forecasts for the cash rate with the next move widely tipped to be a rise, but not until early 2015.