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Full text of the Australian Central Bank statement

2019-10-01T06:02:15.753Z


[Sydney 1st Reuters]-A statement from the Reserve Bank of Australia (RBA, Central Bank) after the 1-day policy meeting: The Policy Board today announced that the official cash rate for policy interest rates will start at 1.00%


[Sydney 1st Reuters]-A statement from the Reserve Bank of Australia (RBA, Central Bank) after the 1-day policy meeting:

The policy board today decided to reduce the official cash rate of the policy rate from 1.00% to 0.75%.

The outlook for the global economy is still valid, but risks are leaning downwards. Companies are reducing spending plans due to increased uncertainty, and disputes over US-China trade and technology are affecting international trade flows and investments. At the same time, unemployment is low in most developed countries and wage growth is rising, but inflation remains low. While China continues to address financial system risks, authorities are taking further steps to support the economy.

Interest rates are extremely low worldwide, and it is widely expected that central banks will further ease monetary policy in order to respond to sustained downside risks to the global economy and to curb inflation. Long-term government bond yields are at record lows in many countries, including Australia. Corporate and household borrowing rates are also at historically low levels. The Australian dollar is at the lowest level recently.

The Australian economy grew 1.4% in the second quarter and was lower than expected. However, the economic growth rate in the first half of this year is slightly higher than the second half of 2018, and seems to have reached a moderate turning point. Low interest rates, recent tax cuts, continued spending on infrastructure, some signs of stabilization in the second-hand housing market, and a bright outlook for the resource sector should all support growth. As household disposable income remains at a modest increase for a long period of time and continues to squeeze consumption spending, the main domestic uncertainty factor continues to be consumption.

Employment continues to grow strongly, and the labor force participation rate is a record high. However, the unemployment rate has leveled off around 5.25% in recent months. Leading indicators of labor demand indicate that employment growth is likely to slow from the recent fast pace. Wage growth is still constrained and there is little upward pressure at present. Strong labor demand is met by increased supply. Suppression of wage growth has also affected public sector wages nationwide. A further gradual rise in wages would be a welcome development. Taken together, recent circumstances suggest that the Australian economy can maintain lower unemployment and underemployment.

Inflation pressures are still constrained and are likely to continue for some time. Both the overall inflation rate and the underlying inflation rate are expected to be slightly below 2% in 2020 and slightly above 2% in 2021.

Signs of a further recovery are seen in the second-hand housing market, mainly in Sydney and Melbourne. On the other hand, housing construction has weakened, and mortgage growth has remained at a low level. Investor demand for funds is constrained, and the credit environment centered on SMEs continues to be difficult. Mortgage rates are at record lows, and competition for high-credit borrowers is intensifying.

The board today decided to further reduce policy interest rates to support employment and income growth and to increase confidence that inflation will eventually meet the medium-term goal. The economy still has surplus capacity, and lower interest rates will help promote its use. The Board also took into account the factors leading to the global trend of lower interest rates and the impact of this trend on the Australian economy and inflation.

It is reasonable to expect that long-term low interest rates will be required in Australia to achieve full employment and inflation targets. The Board will continue to monitor trends such as the labor market and further relax monetary policy as necessary to support sustainable economic growth, full employment, and achievement of long-term inflation targets.

Source: asahi

All news articles on 2019-10-01

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