Australian Official Cash Rate Left at Record Low 1.5%

April 3, 2018

As recently as two months ago, Reserve Bank of Australia Board members were sticking to the prediction that growth would rebound at least to 3% this year. The February post-meeting statement asserted, “The Bank’s central forecast for the Australian economy is for GDP growth to pick up, to average a bit above 3 per cent over the next couple of years.” However, today’s statement, like the one in March, strikes a more cautious tone:

The Australian economy grew by 2.4 per cent over 2017. The Bank’s central forecast remains for faster growth in 2018. Business conditions are positive and non-mining business investment is increasing. Higher levels of public infrastructure investment are also supporting the economy. Stronger growth in exports is expected after temporary weakness at the end of 2017. One continuing source of uncertainty is the outlook for household consumption, although consumption growth picked up in late 2017. Household income has been growing slowly and debt levels are high.

Inflation doesn’t pose short-term risk. “Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. Inflation is likely to remain low for some time, reflecting low growth in labor costs and strong competition in retailing.”

The OCR has been at 1.5% since a quarter percentage point reduction in August of 2016. That cut culminated 200 basis points of easing that began in the final quarter of 2012.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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