RBA Cuts Rates August 6, 2013

For the second time this year the Reserve Bank of Australia has today cut official interest rates by 25 basis points to a 1959 low of 2.5%.  Not since 1990 have interest rates been cut during an election campaign and the political grenades have already been launched sparking debate about the relative strength of the Australian economy.

Here’s what the Governor had to say;

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to lower the cash rate  by 25 basis points to 2.5 per cent, effective 7 August 2013.

Recent information is consistent with global growth running a  bit below average this year, with reasonable prospects of a pick-up next year.  Commodity prices have declined but, overall, remain at high levels by  historical standards. Inflation has moderated over recent months in a number of  countries.

Globally, financial conditions remain very  accommodative, though the recent reassessment by markets of the outlook for US monetary  policy has seen a noticeable rise in  sovereign bond yields, from exceptionally low levels. Volatility in financial  markets has increased and has affected a number of emerging market economies in  particular.

In Australia, the economy has been growing a  bit below trend over the past year. This is expected to continue in the near  term as the economy adjusts to lower levels of mining investment. The  unemployment rate has edged higher. Recent data confirm that inflation has been  consistent with the medium-term target. With growth in labour costs moderating,  this is expected to remain the case over the next one to two years, even with the  effects of the recent depreciation of the exchange rate.

The easing in monetary policy over the past  18 months has supported interest-sensitive spending and asset values, and  further effects can be expected over time. The pace of borrowing has remained  relatively subdued, though recently there are signs of increased demand for  finance by households.

The Australian dollar has depreciated by  around 15 per cent since early April, although it remains at a high level. It  is possible that the exchange rate will depreciate further over time, which  would help to foster a rebalancing of growth in the economy.

The Board has previously noted that the  inflation outlook could provide some scope to ease policy further, should that be  required to support demand. At today’s meeting, and taking account of recent  information on prices and activity, the Board judged that a further decline in  the cash rate was appropriate. The Board will continue to assess the outlook  and adjust policy as needed to foster sustainable growth in demand and  inflation outcomes consistent with the inflation target over time.

RBA Leaves Rates on HOLD April 2, 2013

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 3.0 per cent.

Global growth is forecast to be a little below average for a time, but the downside risks appear to be reduced. While Europe remains in recession, the United States is experiencing a moderate expansion and growth in China has stabilised at a fairly robust pace. Around Asia generally, growth was dampened by the earlier slowing in China and the weakness in Europe, but again there are signs of stabilisation. Commodity prices have declined somewhat recently, but are still at historically high levels.

Internationally, financial conditions are very accommodative. Risk spreads are narrow and funding conditions for financial institutions have improved. Long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Borrowing conditions for large corporations are similarly very attractive. Share prices are substantially above their low points. However, the task of putting private and public finances on sustainable paths in several major countries is far from complete. Accordingly, financial markets remain vulnerable to setbacks.

In Australia, growth was close to trend over 2012, led by very large increases in capital spending in the resources sector, while some other sectors experienced weaker conditions. Looking ahead, the peak in resource investment is drawing close. There will, therefore, be more scope for some other areas of demand to strengthen.

Recent information suggests that moderate growth in private consumption spending is occurring, though a return to the very strong growth of some years ago is unlikely. While the near-term outlook for investment outside the resources sector is relatively subdued, a modest increase is likely to begin over the next year. Dwelling investment is slowly increasing, with rising dwelling prices and high rental yields. Exports of natural resources are strengthening. Public spending, in contrast, is forecast to be constrained.

Inflation is consistent with the medium-term target, with both headline CPI and underlying measures at around 2¼ per cent on the latest reading. Labour costs remain contained and businesses are focusing on lifting efficiency. These trends should help to keep inflation low, even as the effects on prices of the earlier exchange rate appreciation wane. The Bank’s assessment remains that inflation will be consistent with the target over the next one to two years.

There are a number of indications that the substantial easing of monetary policy during late 2011 and 2012 is having an expansionary effect on the economy. Further such effects can be expected to emerge over time. On the other hand, the exchange rate, which has risen recently, remains higher than might have been expected, given the observed decline in export prices. The demand for credit has also remained low thus far, as some households and firms continue to seek lower debt levels.

The Board’s view is that with inflation likely to be consistent with the target, and with growth likely to be a little below trend over the coming year, an accommodative stance of monetary policy is appropriate. The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand. At today’s meeting, the Board judged that it was prudent to leave the cash rate unchanged. The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target over time.

Interest Rates Unchanged November 7, 2012

Howdy All,

The Reserve Bank of Australia (RBA) has left interest rate on hold at 3.25 per cent at its November board meeting. It follows a quarter of a percentage point reduction in October. It is first time in six years the RBA has left the cash rate unchanged on Melbourne Cup day.

While homeowners and the retail sector will be disappointed, we are certain that self funded retirees will be breathing a sigh of relief as it is next to neigh impossible to find a decent risk free yield at this current moment in time.

Until next time take care

Luke Eres