Policymakers at the Reserve Bank of Australia felt that there is still scope for further monetary easing, although the inflation outlook is slightly higher than initially projected due to the depreciation of the Australian dollar, the minutes of the July 2nd policy meeting of the Reserve Bank Board showed Tuesday.
At the meeting, the central bank opted to keep the benchmark cash rate unchanged at a record low of 2.75 percent for a second straight month. The last policy change was in May, when the cash rate was cut by a quarter point to the current level.
The bank has reduced the rate by a cumulative 200 basis points since the end of 2011 as the approaching peak in resource investment required strengthening of demand in other sectors of the economy.
The board noted that the current stance of policy was "appropriate for the time being", given the exchange rate adjustment that was occurring and with the substantial degree of monetary stimulus already in place.
The members of the board were of the view that the exchange rate may depreciate further over time as the terms of trade and mining investment declined, which would help to foster a rebalancing of growth in the economy.
The policymakers noted that inflation outlook is "slightly higher" because of the exchange rate depreciation. "The depreciation was expected to add a little to inflation over time, but the forecast was for inflation to remain consistent with the target," the members said. Despite the depreciation, the exchange rate remained at a high level, they pointed out.
The members presumed that the effects of past policy actions is yet to be felt across the economy, given the lags involved in the transmission of monetary policy. According to the policymakers, the effects to date were most evident in the housing market and were expected to be apparent in further growth in dwelling investment.
The outlook for investment in the non-mining business sector remained for moderate growth, but near-term indicators for investment were still somewhat subdued, the members judged.
Earlier this month, Prime Minister Kevin Rudd said that the China-led resources boom is coming to an end and the country must now focus on diversifying its economy. He said Australia needs a transition from an investment-intensive phase in minerals and energy sector to a new phase of investment in other sectors of the economy, including the traded sector.
Rudd had also said that relying on the lower dollar alone to boost competitiveness is insufficient for the great economic task that lies ahead and the country must embrace a new national competitiveness agenda.
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May 01, 2026 15:54 ET Central banks dominated the economics news flow this week with almost all major ones announcing their latest policy decisions and many boosted expectations for a rate hike in June. In other news, several countries released the preliminary data for first quarter economic growth. In the U.S., comments by Fed Chair Jerome Powell were also in focus as his term ends this month.