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RBA Minutes: Global Economic Conditions Continue To Recover


Members of the Reserve Bank of Australia's Monetary Policy Board have noted the continued improvement of global economic conditions, minutes from the bank's August 1 meeting revealed on Tuesday.

At the meeting, the central bank decided to leave its key interest rate unchanged at a record low 1.50 percent for the eleventh consecutive meeting.

"Taking account of the available information and the need to balance the risks associated with high household debt in a low-inflation environment, the board judged that holding the stance of monetary policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time," the minutes said.

The members also said that low wage growth and persistently high household debt could cause consumption growth to be lower than expected.

They also noted the strengthening of the Australian dollar, which moved to its highest level since 2015.

"There had been a broadly based depreciation of the U.S. dollar. Consistent with that, a number of currencies were close to their highs of the previous few years against the U.S. dollar, including the euro and the Canadian dollar," the minutes said.

The higher exchange rate is likely to contribute to subdued price pressures in the economy. The bank observed that it is also weighing on the outlook for output and employment.

The unemployment rate is expected to decline a little over the next couple of years. However, wage growth remains low and this is likely to continue for a while yet, the bank added.

The economy is forecast to grow at an annual pace of around 3 percent over the next couple of years. According to RBA, one source of uncertainty for domestic economy is the outlook for consumption.

Inflation is forecast to pick up gradually as the economy strengthens. CPI inflation and measures of underlying inflation are running at a little under 2 percent.

But the bank cautioned: "A further appreciation of the exchange rate would be expected to result in a slower pick-up in inflation and economic activity than currently forecast."

Also on Tuesday, the Australian Bureau of Statistics said that the total number of new motor vehicle sales in Australia was down a seasonally adjusted 2.0 percent on month in July, coming in at 99,911.

That follows the downwardly revised 1.1 percent increase in June (originally 1.2 percent).

Sales for passenger vehicles added 0.5 percent on month, while sales of sports utility vehicles gained 1.0 percent and other vehicle sales advanced 0.5 percent.

On a yearly basis, new motor vehicle sales climbed 1.8 percent after advancing a downwardly revised 3.4 percent in the previous month (originally 3.6 percent).

by RTTNews Staff Writer

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