Australia keeps interest rates on hold

Tuesday 06 May 2014 07.57
Australia's central bank keeps interest rates at record low 2.5%
Australia's central bank keeps interest rates at record low 2.5%

Australia's central bank today kept interest rates at a record low 2.5%, citing only a tentative improvement in non-mining sectors of the economy.

The Reserve Bank of Australia predicted a period of stability in the cash rate, in a statement whose wording was little changed from the previous month.  

The bank last cut rates in August in a bid to support the economy as a decade-long mining investment boom slows down. 

"In the board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target," it said. 

Last month, the Australian Bureau of Statistics said consumer prices rose 0.6% in January-March from the previous three months, when it climbed 0.8%. In the year to March prices rose 2.9%, still within the central bank's 2-3% target.

Bank governor Glenn Stevens said today recent information suggested "moderate growth" was occurring in consumer demand and forecast strong expansion in housing construction. 

"Some indicators of business conditions and confidence have improved from a year ago and exports are rising," he said.  

"But at the same time, resources sector investment spending is set to decline significantly. And, 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 expected to be "subdued" while the bank said "it will probably be some time yet before unemployment declines consistently".  

Unemployment came in at 5.8% in March, unexpectedly down on the previous month. 

"Looking ahead, 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 percent target over the next two years," the bank added.