RBA LEAVES RATE UNCHANGED

RBA LEAVES RATE UNCHANGED

The Reserve Bank of Australia (RBA) decided today to leave the cash rate unchanged at 2.5 per cent, noting inflation is within the target range and both Australian and global growth is only slightly below average.

RBA Governor Glenn Stevens (pictured) says the Australian economy’s “a bit” below average growth is expected to continue in the near term as the economy adjusts to lower levels of mining investment.

The unemployment rate has edged higher, but there has been an improvement in household and business sentiment recently.

Inflation is consistent with the medium-term target and commodity prices have declined, but remain at historical highs.

“With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the lower exchange rate,” says Stevens.

The Australian dollar rose recently since the RBA board’s last meeting, but is still about 10 per cent below its level in April.

“A lower level of the currency than seen at present would assist in rebalancing growth in the economy,” says Stevens.

Stevens says the pace of borrowing is relatively subdued, but there are signs of increased demand for finance by households.

There is also continuing evidence of a shift in savers' behaviour in response to declining returns on low-risk assets.

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