RBA leaves cash rate on hold

The Reserve Bank of Australia Board has today left the cash rate on hold at 4.5 percent

RBA leaves cash rate on hold
RBA leaves cash rate on hold
August 3, 2010

The Reserve Bank of Australia (RBA) Board has today left the cash rate on hold at 4.5 percent amid ongoing economic uncertainty.

"In Europe, while output in some key countries has been improving significantly, prospects for next year are more uncertain given planned fiscal contraction," RBA Governor Glenn Stevens said after this afternoon’s meeting.

"US growth was stronger in the first half of 2010 but the pace of labour market improvement has been slow and the expansion may be somewhat lacklustre in the second half of 2010," Stevens said.

With the high level of the terms of trade expected to add to incomes and demand, he says output growth in Australia over the year ahead is likely to be about trend.

"Consumption spending is recording a modest increase at present, with households displaying a degree of caution, but most indicators suggest business investment will increase over the coming year.

"Business credit has stabilised, though credit conditions for some sectors remain difficult. Credit outstanding for housing has continued to expand, but the upward pressure on dwelling prices appears to have abated."

According to Stevens, the labour market has continued to firm gradually, while growth in wages has "picked up a little".

"Through to mid 2011, underlying inflation is likely to be in the top half of the target zone, while CPI inflation will probably be just above 3 percent for a few quarters due to the impact of the tax changes and increases in utilities prices."

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