The Reserve Bank of Australia (RBA) has left official rates unchanged, citing “signs of stabilisation” in the global economy and a pick-up of activity in China.
The central bank’s decision to leave the cash rate at a 49-year low of 3.0 per cent on Tuesday had been widely tipped by economists, coming after 425 basis points of reductions since September last year.
“Monetary policy has been eased significantly,” RBA governor Glenn Stevens said in a statement.
He said those rate changes had yet to have an impact on the economy, but, together with substantial fiscal initiatives, would provide significant support to domestic demand during the period ahead.
“In assessing whether further reductions in the cash rate are required over the period ahead, the board will monitor how economic and financial conditions unfold and how they impinge on prospects for a sustainable recovery in economic activity,” Mr Stevens said.
Treasurer Wayne Swan refused to speculate whether the central bank would need to cut rates again, but financial markets are pricing in a further 50 basis points reduction later this year.
He said economic stimulus efforts so far has been responsible for supporting jobs.
“I think it would be pretty fair to say if it wasn’t for the economic stimulus in the system, the impact of monetary policy so far, we would be seeing unemployment rates much higher than they are now,” Mr Swan told reporters in Canberra.
However, official data on Thursday could see the jobless rate touch six per cent for the first time in six years.
The unemployment rate as of March was 5.7 per cent, up from 3.9 per cent in February 2008.
Opposition Leader Malcolm Turnbull said it was heartening the RBA was seeing signs of economic recovery.
“It’s a cautious statement. They’re seeing signs of recovery around the world,” Mr Turnbull told reporters in Sydney.
“They particularly identified signs of growth in China, which is obviously very important to us, and so they’ve … got a steady as she goes policy and they’ve held rates steady, and that should be seen as an encouraging sign by Australians.”
Last month the RBA governor said the economy was already in recession, and didn’t need to wait for this to be confirmed by two consecutive quarters of negative growth.
Still, new data continues to show early signs of a recovery in the housing market, with new building approvals rising for a second consecutive month – ending seven months of decline.
Housing Minister Tanya Plibersek said the government’s more generous first home owners grant scheme and low interest rates were having a positive effect on the housing market.
“A strong housing market is critical for underpinning confidence and supporting jobs in the Australian economy,” she said in a statement.
However, the government has yet to say officially whether the grant scheme – which was doubled to $14,000 for established homes and raised to $21,000 for new properties – would be extended beyond the scheduled June 30 expiry date.
Figures from the Australian Bureau of Statistics showed building approvals rose by a seasonally-adjusted 3.5 per cent in March after an upwardly revised 8.0 per cent rise in February.