By Jason Cadden and Sam McKeith
(Australian Associated Press)
The Reserve Bank appears in no rush to move its interest rate any time soon and seems a little bit more optimistic about the economy.
In a widely expected decision on Tuesday, the RBA kept its cash rate unchanged at its record low of two per cent after cutting in February and May.
RBA governor Glenn Stevens said that although the economy is growing at a below average pace, there were higher rates of borrowing.
He also indicated Australia’s unemployment rate may have peaked at its recent high of 6.3 per cent.
“Credit is recording moderate growth overall, with stronger borrowing by businesses and growth in lending to the housing market broadly steady over recent months,” he said in a statement announcing the RBA’s rates decision.
“The rate of unemployment, though elevated, has been little changed recently. Overall, the economy is likely to be operating with a degree of spare capacity for some time yet.”
NAB chief markets economist Ivan Colhoun said the RBA’s comments on the jobs market were better than what it had previously said.
“Before they were forecasting the unemployment rate to rise but now they say it hasn’t continued to rise, it’s been unchanged, which is better than what they’ve been forecasting,” he said.
“There was nothing that suggests any imminent or active consideration of easing (of the cash rate) at the moment.”
Meanwhile, the RBA also appeared relatively unfazed by the turmoil on China’s stock market and worries about Greece possibly making a messy exit from the euro zone.
Mr Stevens said long-term borrowing rates remain low for governments on international money markets despite developments in China and Greece.
He also reiterated the RBA’s desire to see the Australian dollar fall further against the US dollar.
Mr Colhoun was unsurprised that there was very little mention of the falling stock market in China, which has lost $US3 trillion in less than a month.
“China is something that would have had a look at but it’s not something that they could quickly develop a view in the post-board meeting statement, I think they’ll watch it a bit further,” he said.
JP Morgan economist Ben Jarman said it was probably too early for the RBA to react in a “meaningful way” to events in China and Greece.
“The RBA has been looking at domestic data, which has been mixed but generally not ringing any alarm bells,” he said.
Housing Industry of Australia chief economist Harley Dale said there will be ongoing speculation about whether the RBA has finished with its rate cuts for now.
“Regardless of whether the interest rate gun stays in the rack or not, the key is that super low borrowing costs are here to stay throughout 2015/16,” he said.
“That will help support housing activity at a time when there is scant evidence of strong momentum elsewhere in the domestic economy.”