Full Text of Australian Central Bank-Reuters News-International

[Sydney 3 Reuters]-The Reserve Bank of Australia (RBA, Central Bank) released a statement after the policy board meeting on the 3rd:

The policy board today decided to keep the policy rate cash rate at 1.0%.

Although risks are leaning downwards, the outlook for the global economy is still valid. Companies are reducing spending plans due to increased uncertainty, and trade and technology disputes 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.

The global financial situation continues to be relaxed. Many central banks have lowered interest rates this year, and further monetary easing is widely expected due to the ongoing downside risks of the global economy and inflation control. Long-term government bond yields have declined and 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.

Australia's economic growth rate in the first half of the year was below initial expectations, with low long-term income growth and falling housing prices putting pressure on personal consumption. The growth rate is expected to gradually increase and approach the trend in a few years. This outlook is supported by low interest rates, recent tax cuts, continued spending on infrastructure, signs of stabilization in some second-hand housing markets, and a bright outlook for the resource sector. The main domestic uncertainty continues to be consumption, but the increase in household disposable income and the stability of the housing market are expected to support consumption.

Employment has increased significantly over the past few years, and the labor force participation rate has reached a record high. However, the unemployment rate has leveled off at 5.2% in recent months. 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 labor market conditions 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 is weakening. Mortgage growth remains low. Investor demand for funds continues to be constrained, and the credit environment, particularly for SMEs, remains challenging. Mortgage rates are at record lows, and competition for high-credit borrowers is intensifying.

It is reasonable to expect long-term low interest rates to reduce unemployment and achieve more certain progress toward inflation targets. The Board will continue to monitor labor market and other trends and further relax monetary policy as necessary to support sustainable economic growth and achieving long-term inflation targets.