Australia’s central bank kept its benchmark cash rate at 1.50 percent, as widely expected, and maintained its upbeat view of the economy, saying investment had improved “further” in the non-mining sector while economic growth is expected to average around 3 percent in the next few years.
The Reserve Bank of Australia (RBA), which has kept its rate steady since lowering it in August 2016, also reiterated its view from last month that business conditions were positive and capacity utilization had increased, with forward-looking indicators more positive than for some time.
In its last statement from Nov. 6, the RBA said the outlook for non-mining investment had “improved,” with today’s statement adding the word “further.”
Australia’s economy grew by an annual rate of 1.8 percent in the first and second quarters of this year but RBA said recent data suggested the economy expanded around its trend rate in the third quarter.
Economists are forecasting annual growth over 3 percent in the third quarter after retail sales for October rose 0.5 percent from September, higher than expected and the fastest rate since May.
The RBA’s optimism over economic growth was echoed last week by the Organisation for Economic Co-operation and Development (OECD), which called on the central bank to start raising its rate in the second half of next year as wages and prices rise.
Higher rates will also ease the pressure on house prices and reduce the threat of a build-up of financial imbalances, Paris-based OECD said in its latest world economic outlook.
So far, however, there are few signs of price and wage pressure, with Australia’s inflation rate down to 1.8 percent in the third quarter from 1.9 percent in the second quarter, below RBA’s target of 2 – 3 percent
While unemployment has been declining – it fell to 5.4 percent in October from 5.5 percent in September – wage growth remains low and RBA said it expects this to continue “for a while yet, although stronger conditions in the labour market should see some lift in wage growth over time.”
The Reserve Bank of Australia issued the following statement:
Australia holds rate, non-mining investment rises further