RBA Minutes: Rates Remain Unchanged

Officials of the Reserve Bank of Australia (RBA) have decided against employing further easing bias at their meeting this month, a strong hint that interest rates will maintain their current value further into the future.

“Taking into account the recent data, and having eased monetary policy at its May and August meetings, the Board judged that the current stance of monetary policy was consistent with sustainable growth in the Australian economy and achieving the inflation target over time,” the minutes of the September 6 policy meeting showed Tuesday.

The Bank failed to make additional moves at its September meeting after previously slashing rates to a record low of 1.5% in August. The September monetary policy announcement was the last announcement made by the retiring governor Glen Stevens. From next month, policy announcements will be made by the Bank’s new governor Philip Lowe. The new central Bank governor is also expected to deliver a speech on Friday.

In the last 10 years, Stevens has presided over a recession free economy. Australia has successfully evaded recession for 25 years, this has made it the longest standing economy not to experience 2 consecutive quarters of contraction.

The minutes released today said business investment had fallen further in the June quarter, driven by a decline in mining investment, in line with earlier expectation.

"Taking into account the recent data, and having eased monetary policy at its May and August meetings, the Board judged the current stance of monetary policy was consistent with sustainable growth in the Australian economy and achieving the inflation target over time," the Board said in its minutes.

The Reserve Bank has an inflation target of between 2 to3%, and the rate cuts in May and August were prompted by weak inflation figures in the March and June quarters.

The RBA also said that economic indicators hinted at weaker conditions in the housing market than a year earlier. It noted that the number of auctions had declined, and in recent months the value of housing loan approvals had been broadly steady, but housing credit growth had been lower.

"Housing market conditions overall appeared to have eased since the previous year, although the dwelling construction cycle remained in a strong upswing," the statement said. "Housing prices had risen modestly over the past year and turnover had been below average."

"The RBA has not changed its view since cutting rates to 1.5 per cent in August, which implies it sees little need to cut interest rates again," wrote Paul Dales, chief Australian economist at Capital Economics in a note to clients. "Although the strong defence of its view that the housing market has softened implies that housing is not a barrier to further cuts."

Australia’s gross domestic product (GDP) edged 0.5% higher in the second quarter. This was less than half of the first quarter rate, but higher than a year ago by 3.3%.