Australia's central bank maintained its key interest rate unchanged at a record low on Tuesday, as policymakers expect higher commodity prices to boost national income.
The board of the Reserve Bank of Australia, governed by Philip Lowe, decided to retain the cash rate at 1.50 percent. The bank had reduced the rate by 25-basis points each in August and May.
"Taking account of the available information, and having eased monetary policy earlier in the year, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," the bank said in a statement.
From the neutral tone of today's statement and recent speeches, it is clear that the RBA does not think it needs to cut interest rates further, Paul Dales, chief Australia & NZ economist at Capital Economics, said.
And if underlying inflation stays low and the housing market slows, rates may yet be cut to 1.00 percent in the second half of next year, Dales added.
The RBA expects some slowing in the year-ended growth, before it picks up again. Export of resources are forecast to increase further, while business investment is set to remain subdued, the bank noted.
Higher commodity prices underpinned a rise in terms of trade, although they remain much lower than they have been in recent years. Higher prices are providing a boost to national income.
The Australian Bureau of Statistics is scheduled to issue third quarter GDP data on December 7. The sequential growth is forecast to slow to 0.2 percent from 0.5 percent in the second quarter.
Regarding the labor market, the bank said the unemployment rate has declined this year, while employment growth overall has slowed. The forward-looking indicators point to continued expansion in employment in the near-term.
The continuing subdued growth in labor costs means that inflation is expected to remain low for some time, before returning to more normal levels.
The bank also observed that conditions in the housing market have strengthened overall, although they vary considerably around the country. Further, the bank said housing credit has picked up a little, although turnover of established dwellings is lower than it was a year ago.
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