RBA Board keeps the official cash rate on hold at 4.75pc amid decline in output and moderation in employment growth
May 3, 2011
A decline in output following recent natural disasters and a moderation in employment growth have seen the Reserve Bank of Australia keep the official cash rate on hold at 4.75 percent.
Speaking at the Board’s meeting today, RBA Governor Glenn Stevens says the global economy is continuing its expansion, led by very strong growth in the Asian region.
“The recent disaster in Japan is having a major impact on Japanese production, and some effects on production of manufactured products further afield,” Stevens says.
“Commodity prices, including oil prices, have generally continued to rise over recent months, pushing up measures of consumer price inflation in many countries,” he says.
As other countries move to tighten monetary policies, Stevens says Australia’s terms of trade are reaching higher levels than assumed a few months ago, and national income is growing strongly.
He says private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices, while there continues to be caution in the household sector.
NATURAL DISASTERS
Natural disasters over the summer have reduced output in some key sectors and Stevens says the resumption of coal production in flooded mines is taking longer than initially expected.
As a result, he says it is likely this caused a decline in real GDP in the March quarter.
“Production levels should, however, recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way.
“Over the medium term, overall growth is likely to be at trend or higher.”
Growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5 percent.
At today’s meeting, Stevens says the Board judged that the current mildly restrictive stance of monetary policy remained appropriate.
“In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation,” he says.
The official cash rate has remained steady at 4.75 percent since rising by 25 basis points in November last year.