Ongoing caution in spending and borrowing sees the Reserve Bank leave the official cash rate unchanged at 4.75 percent
March 1, 2011
Caution in spending and borrowing amid recent natural disasters has seen the Reserve Bank leave the official cash rate unchanged at 4.75 percent.
Speaking at the Board’s meeting today, RBA Governor Glenn Stevens says while private investment is picking up, namely in the resources sector, households are tightening their belts.
Stevens assures the global economy is continuing its expansion, led by very strong growth in the Asian region.
“Commodity prices have risen further over recent months, pushing up measures of consumer price inflation in many countries,” he says.
“A number of countries have been moving to tighten their monetary policy settings. Overall, though, financial conditions for the global economy remain accommodative.”
While the effects of the natural disasters over the summer have reduced output, the RBA says production levels should recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way.
“Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend,” Stevens says.
“Business balance sheets generally are being strengthened, and the run-up in household leverage has abated,” he says.
Stevens adds that the labour market firmed in 2010, with “unusually strong growth” in employment and a decline in the rate of unemployment.