The Reserve Bank of Australia on Tuesday retained the cash rate at a record low of 2.75 percent, saying that the exchange rate remained elevated despite a sharp depreciation since the previous policy meeting.
With the inflation outlook also remaining favorable, the central bank sees scope for further monetary easing. The decision to keep the rate on hold after cutting it to record-low last month was in line with economists' expectations.
At the meeting, the Reserve Bank Board judged that the easier financial conditions now in place will contribute to strengthening of growth over time.
The bank has reduced the rate by a cumulative 200 basis points since the end of 2011 as the approaching peak in resource investment called for strengthening of demand in other sectors of the economy.
The central bank expects GDP growth to be a bit below trend at around 2.5 percent over 2013, according to a report released last month. The RBA said in the report that the outlook for non-mining business investment remained relatively weak over the next few months.
The government forecasts GDP growth of 2.75 percent for 2013-14 and expects growth to accelerate to a pace of 3 percent in 2014-15.
According to a statement by Governor Glenn Stevens today, the Board maintained the view that the current inflation outlook "may provide some scope for further easing, should that be required to support demand."
Inflation is expected to be consistent with the medium-term target over the next one to two years.
Stevens said though the exchange rate has depreciated since the previous Board meeting, the Board's assessment was that it "remained high, considering the decline in export prices that has taken place over the past year and a half."
He said the past monetary easing has supported interest-sensitive areas of spending and has been reflected in portfolio shifts by savers and higher asset values. The central bank expects to see further effects over time.
The pace of borrowing has thus far remained relatively subdued, though recently there have been some signs of increased demand for finance by households, he added.
Stevens said the global growth is running a bit below average this year, with reasonable prospects of a pick-up next year.
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April 24, 2026 15:15 ET Economics news flow was relatively light this week even as the conflict in the Middle East continued, raising concerns for policymakers. In the U.S., spending data, initial jobless claims and pending home sales were the highlights. Business confidence in the biggest euro area economy was in focus in Europe. Inflation data from Japan gained attention in Asia.