Archive | Australia

Australian reserve bank cuts rate based on general slowdown, not resources pickup

Published 7 December 2011

The Reserve Bank of Australia cut its cashrate by another 25 basis points yesterday, to 4.25%. The bank cut the rate to 4.5% on 1 November after holding it at 4.75% for a year.

Bank governor Glenn Stevens said: “Growth in the global economy has moderated this year after a strong performance in 2010. Some of the slowing reflected temporary factors and, as these passed, the pace of expansion in the US & much of Asia began to pick up around mid-year.

“China’s growth has been slowing, as policymakers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.

“The sovereign credit & banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on economic activity there over the period ahead. Financial markets have experienced considerable turbulence, and financing conditions have become much more difficult, especially in Europe. This, together with precautionary behaviour by firms & households, means that the likelihood of a further material slowing in global growth has increased. Commodity prices have reflected this, declining further over recent months and taking pressure off CPI inflation rates. This has increased the scope for some easing in monetary policy in a number of countries.

“Information about the Australian economy suggests output growth has been close to trend, with demand growth stronger than that. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come.

“Some related service sectors are enjoying better-than-average conditions. In other sectors, changed behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little since mid-year, though it remains close to 5%.

“CPI inflation on a year-ended basis remained above the target at the latest reading, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources & related sectors in the near term has lessened. Accordingly, the bank’s current judgment is that inflation is likely to be consistent with the 2–3% target in 2012 & 2013, abstracting from the impact of the carbon pricing scheme.

“The reduction in the cashrate as a result of the board’s previous decision flowed through to lending rates, which are now around their average level of the past 15 years. Short-term market interest rates have tended to decline a little further in recent weeks, though term funding conditions for financial institutions have become more difficult. Credit growth remains subdued and asset prices have declined further over recent months. The exchange rate has been quite variable over the past few months, but remains at an historically high level.

“Overall, the board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cashrate. The board will continue to set policy as needed to foster sustainable growth & low inflation over time.”

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australian cashrate down 25 points, still 2% above NZ

Published 1 November 2011

The Reserve Bank of Australia cut its cashrate by 25 basis points to 4.5% today, a year after raising it to 4.75%.

New Zealand’s Reserve Bank governor, Alan Bollard, cut this country’s official cashrate to 2.5% in March to help the Canterbury recovery and held it there last week, saying domestic expansion had remained modest despite strong commodity prices, business confidence had fallen and the Canterbury recovery was still expected to provide significant impetus for demand.

The Australian bank’s governor, Glenn Stevens, said today: “Recent information is consistent with a moderation in the pace of global growth, though fears of a major downturn have not been borne out so far. The pace of US economic expansion picked up in the September quarter, but is still only moderate and leaves considerable spare capacity. China’s growth has slowed, as policymakers there had intended. Output in Asia has now recovered from the effects of the Japanese earthquake, and domestic demand in the region is generally expanding. Trade performance, however, is starting to see some effects of a significant slowing in economic activity in Europe, where the prospects are for economic weakness to continue. Commodity prices, while still at high levels, have generally declined over recent months.

“Financial markets have recovered somewhat from the turmoil of recent months, helped by stronger economic data in the US and by signs that European governments are making progress in their efforts to deal with the sovereign debt & banking problems. Equity markets have gained ground and the $A has risen significantly as risk aversion has lessened. But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest, and the effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms & households.

“Information about the Australian economy suggests moderate growth overall. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, cautious behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little over recent months, though it remains close to 5%.

“After underlying inflation started to pick up in the first half of the year, recent information suggests the subdued demand conditions and the high exchange rate have contained inflation more recently, notwithstanding continuing sizeable increases in utilities charges. CPI inflation on a year-ended basis remains above the target, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources & related sectors in the near term has lessened. Accordingly, the bank’s current judgment is that inflation is likely to be consistent with the 2–3% target in 2012 & 2013, abstracting from the impact of the carbon pricing scheme.

“Financial conditions have been easing somewhat recently, with market interest rates declining a little and competition to lend increasing.  But overall conditions have remained tighter than normal, with borrowing rates still a little higher than average, credit growth subdued and asset prices lower than earlier in the year. The exchange rate has been very variable over the past few months, but on the whole has remained at historically high levels.

“Over the past year, the board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation. With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth & 2–3% inflation over time.”

Earlier stories:

27 October 2011: Bollard holds to 2.5%, says inflation settling to 2%

10 March 2011: Bollard cuts to 2.5% to aid quake recovery

2 November 2010: Australian cashrate up again, housing campaigners squawk

5 May 2010: Australia’s official interest rate now 2% above NZ’s

 

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australian Reserve Bank sticks to 4.75%

Published 5 October 2011

The Reserve Bank of Australia decided yesterday to leave its cashrate unchanged at 4.75%.

This is how the bank’s governor, Glenn Stevens, summed up the international picture:

“Conditions in global financial markets have continued to be very unsettled, with uncertainty increasing about both the prospects for resolution of the sovereign debt & banking problems in Europe, and the outlook for global economic growth.

“While temporary impediments that had contributed to a slowing in growth in some countries over recent months are lessening, recent data suggest a continuing period of soft economic conditions in both Europe & the US. Moreover, the uncertainty & financial volatility have reduced confidence, which could result in more cautious behaviour by firms & households in major countries.

“It will take more time for evidence of any effects of the recent European & US financial turbulence on economic activity in other regions to emerge. Thus far, indications are that economic activity is continuing to expand in China & most of Asia. Nonetheless, recent events have led forecasters to reduce their estimates for global gdp growth, which is now expected to be about average this year & next. Prices for commodities have declined over recent weeks, though in general they remain high.

“Australia’s terms of trade are very high, which has increased national income considerably. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions. In other sectors, cautious behaviour by households and the earlier rise in the exchange rate have had a noticeable dampening effect.

“The impetus from earlier Australian Government spending programmes is now also abating, as had been intended. While there remain good reasons to expect solid growth over the medium term, the indications are that the pace of near-term growth is unlikely to be as strong as earlier expected, due both to local & global factors, including the financial turmoil & related effects on business confidence.

“Underlying inflation stopped falling and began to increase earlier this year. The board has been concerned about the prospect of a further pick-up over the period ahead, but over recent months has been weighing the question of whether a period of weaker than expected conditions would contain that pick-up in inflation.

“Recently revised data show a pick-up to date in the underlying pace of price rises that was less sharp than initially indicated. Moreover, with labour market conditions now a little softer and households more concerned about the possibility of unemployment rising, the likelihood of a significant acceleration in labour costs outside the resources & related sectors is lessening.

“Taking into account all the recent information, the path for inflation may now be more consistent with the 2-3% target in 2012 & 2013, abstracting from the impact of the carbon pricing scheme. This assessment will be reviewed on receipt of further data on prices ahead of the board’s next meeting. An improved inflation outlook would increase the scope for monetary policy to provide some support to demand, should that prove necessary.

“The board noted that financial conditions have been easing somewhat, with interest rates for some housing & business loans declining slightly due to increased competition and the fall in some funding costs in financial markets. The exchange rate has also declined from the very high levels of a few months ago. Credit growth remains low, however, and asset prices have declined.”

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australian Reserve Bank holds cashrate, unsure about inflation

Published 6 September 2011

The Reserve Bank of Australia left its cashrate unchanged at 4.75% today.

 

Bank governor Glenn Stevens said unsettled global financial market conditions over recent weeks had made the outlook less clear than it was earlier in the year, but the bank’s board was concerned about the medium-term outlook for inflation.

 

“A number of forecasters have scaled back their global growth estimates over the past couple of months. At this stage, little evidence is available to gauge any effects of the European & US problems on other regions.

 

“Prices for key Australian commodities have remained very high thus far, with growth in China continuing to look solid. As a result, Australia’s terms of trade are now at very high levels and national income has been growing strongly. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions.

 

“In other sectors, cautious behaviour by households and the high level of the exchange rate are having a noticeable dampening effect. The impetus from earlier Australian Government spending programmes is now also abating, as had been intended.

 

“Overall, the near-term growth outlook continues to look somewhat weaker than was expected a few months ago. Beyond the near term, growth is still likely to be at trend or higher, unless the world economic outlook continues to deteriorate.

 

“Growth in employment has been moderate this year and the unemployment rate has been little changed, near 5%, for some time now. Reports of skills shortages remain confined to the resources & related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn, though productivity growth has been weak.

 

“Year-ended CPI inflation should start to decline towards the end of the year, as temporary weather-related effects reverse. But measures of underlying inflation have been increasing this year, after declining for the previous 2 years. While they have, to date, remained consistent within the 2–3% target on a year-ended basis, the board remains concerned about the medium-term outlook for inflation. A key question will be the extent to which softer global & domestic growth will work, in due course, to contain inflation.

 

“Most financial indicators suggest that monetary policy has been exerting a degree of restraint. Credit growth has declined over recent months and is very subdued by historical standards, even with evidence of greater willingness to lend. Most asset prices, including housing prices, have also softened. The exchange rate is high. Each of these variables is affected by other factors as well, but together they point to financial conditions being tighter than normal.”

 

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australia holds cashrate, medium-term inflation a worry

Published 2 August 2011

The Reserve Bank of Australia left its cashrate unchanged at 4.75% today, but governor Glenn Stevens said the bank was concerned about inflation in the medium term.

Mr Stevens said it was still not clear how persistent slower international growth would be: “The supply-chain disruptions are now gradually abating and commodity prices have softened of late, though they generally remain high. In China, most indications suggest only a mild slowdown so far…..

“Australia’s terms of trade are now at very high levels and national income has been growing strongly. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions. But in other sectors, cautious behaviour by households and the high level of the exchange rate are having a noticeable dampening effect. The impetus from earlier Australian Government spending programmes is now also abating, as had been intended.

“The resumption of coal production continues, but a full recovery of flood-affected production now looks unlikely before early next year. Precautionary behaviour by households also looks likely to keep some areas of demand weaker in the near term than earlier expected. Overall, growth in real gdp through 2011 is now likely to be at about trend. Over the medium term, overall growth is still likely to be at trend or higher, unless the world economy deteriorates noticeably.

“Growth in employment has moderated and the unemployment rate has been little changed, near 5%, for some time now. Reports of skills shortages remain confined, at this point, to the resources & related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn, though productivity growth remains weak.

“Year-ended CPI inflation has been high, affected by the extreme weather events earlier in the year. As these effects reverse over the next couple of quarters, CPI inflation should decline. But measures that give a better indication of the trend in inflation have begun to rise over the past 6 months, after declining for the previous 2 years. While they have, to date, remained consistent with the 2–3% target on a year-ended basis, the board remains concerned about the medium-term outlook for inflation.

“It is appropriate under such circumstances for monetary policy to exert a degree of restraint. Most financial indicators suggest that it has been doing so, as a result of the board’s decisions last year. Credit growth has declined over recent months and is very subdued by historical standards, even with evidence of greater willingness to lend.

“Most asset prices, including housing prices, have also softened over recent months. The exchange rate is high. Each of these variables is affected by other factors as well, but together they point to financial conditions being tighter than normal.

At today’s meeting, the board considered whether the recent information warranted further policy tightening. On balance, the board judged that it was prudent to maintain the current setting of monetary policy, particularly in view of the acute sense of uncertainty in global financial markets over recent weeks.”

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australian Reserve Bank holds to “mildly restrictive” stance

Published 6 July 2011

The Reserve Bank of Australia left its cashrate unchanged at 4.75% yesterday.

 

Bank governor Glenn Stevens said the “current mildly restrictive stance of monetary policy” remained appropriate. The bank’s snapshot of world & Australian economic trends:

 

“The global economy is continuing its expansion, but the pace of growth slowed in the June quarter. The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity prices on income & spending in major countries have both contributed to the slowing. The banking & sovereign debt problems in Europe have also added to uncertainty & volatility in financial markets over recent months.

 

“A key question is whether this more moderate pace of growth will continue. Commodity prices have generally softened of late, though they remain at very high levels. Despite the challenging international environment, the central scenario for the world economy envisaged by most forecasters remains one of growth at, or above, average over the next couple of years. A number of countries have tightened monetary policy but, overall, global financial conditions remain accommodative and underlying rates of inflation have tended to move higher.

 

“Australia’s terms of trade are now at very high levels and national income has been growing strongly, though conditions vary significantly across industries. Investment in the resources sector is picking up strongly in response to high levels of commodity prices and the outlook remains very positive. A number of service sectors are also expanding at a solid pace. In other areas, cautious behaviour by households and the high level of the exchange rate are having a noticeable dampening effect. The impetus from earlier Australian Government spending programmes is now also abating, as had been intended.

 

“A gradual recovery from the floods & cyclones over the summer is taking place, though the resumption of coal production in flooded mines continues to proceed more slowly than initially expected. The recovery will boost output over the months ahead, and there will also be a mild boost to demand from the broader rebuilding efforts as they get under way, but growth through 2011 is now unlikely to be as strong as earlier forecast. Over the medium term, overall growth is still likely to be at trend or higher, if the world economy grows as expected.

 

“Growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5%. Most leading indicators suggest that this slower pace of employment growth is likely to continue in the near term. Reports of skills shortages remain confined, at this point, to the resources & related sectors.

 

“After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn. Credit growth remains modest. Signs have continued to emerge of some greater willingness to lend and business credit has expanded this year after a period of contraction. Growth in credit to households, on the other hand, has slowed. Most asset prices, including housing prices, have also softened over recent months.

 

“Year-ended CPI inflation is likely to remain elevated in the near term due to the extreme weather events earlier in the year. However, as the temporary price shocks dissipate, CPI inflation is expected to be close to target over the next 12 months. In underlying terms, inflation has been in the bottom half of the target range, though a gradual increase is expected over time.”

 

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australian cashrate stays at 4.75%

Published 8 June 2011

The Reserve Bank of Australia left its cashrate unchanged at 4.75% yesterday. New Zealand Reserve Bank governor Alan Bollard forecast imminent rate rises here a month ago, but has maintained the official cashrate at 2.5% since cutting it by 50 basis points in March. Dr Bollard makes his next announcement on the cashrate tomorrow.

The Australia bank’s governor, Glenn Stevens, gave his assessment yesterday:

“The global economy is continuing its expansion, led by very strong growth in the Asian region, though the recent disaster in Japan is having a major impact on Japanese production and significant effects on production of some manufactured products further afield.

“Commodity prices have generally softened a little of late but they remain at very high levels, which is weighing on income & demand in major countries and also pushing up measures of consumer price inflation. In response, a number of the countries with stronger expansions have been moving to tighten their monetary policy settings over recent months. Overall, though, financial conditions for the global economy remain accommodative. Uncertainty over the prospects for resolution of the banking & sovereign debt problems in Europe has increased over the past couple of months, which has been adding to financial market volatility.

“Australia’s terms of trade are reaching very high levels and national income has been growing strongly. Private investment is picking up, led by very large capital spending programmes in the resources sector, in response to high levels of commodity prices. Outside the resources sector, investment intentions have been revised lower recently.

“In the household sector thus far, there continues to be a degree of caution in spending & borrowing and a higher rate of saving out of current income. The impetus from earlier Australian Government spending programmes is now also abating, as had been intended.

“The floods & cyclones over the summer have reduced output in some key sectors. As a result, there was a sharp fall in real gdp in the March quarter, despite a solid increase in aggregate demand. The resumption of coal production in flooded mines is taking longer than initially expected, but production levels are now increasing again and there will be a mild boost to demand from the broader rebuilding efforts as they get under way.

“Over the medium term, overall growth is likely to be at trend or higher. Growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5%. Most leading indicators suggest that this slower pace of employment growth is likely to continue in the near term. Reports of skills shortages remain confined, at this point, to the resources & related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.

“Overall credit growth remains quite modest. Signs have continued to emerge of some greater willingness to lend, and business credit has expanded this year after a period of contraction. Growth in credit to households, on the other hand, has softened, as have housing prices. The exchange rate remains, in real effective terms, close to its highest level in several decades. If sustained, this could be expected to exert continued restraint on the traded sector.

“CPI inflation has risen over the past year, reflecting the effects of extreme weather and rises in utilities prices, with lower prices for traded goods providing some offset. The weather-affected prices should fall back later in the year, though substantial rises in utilities prices are still occurring. The bank expects that, as the temporary price shocks dissipate over the coming quarters, CPI inflation will be close to target over the next 12 months.”

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australian cashrate stays at 4.75%

Published 4 May 2011

The Reserve Bank of Australia kept its cashrate at 4.75% yesterday. Though it acknowledged consumer price inflation had been pushed up in many countries, the bank expected Australian CPI to be close to target over the next year.

The Australian bank’s governor, Glenn Stevens gave the background to the decision not to change: “The global economy is continuing its expansion, led by very strong growth in the Asian region. The recent disaster in Japan is having a major impact on Japanese production and some effects on production of manufactured products further afield. Commodity prices, including oil prices, have generally continued to rise over recent months, pushing up measures of consumer price inflation in many countries. A number of countries have been moving to tighten their monetary policy settings. Overall, though, financial conditions for the global economy remain accommodative. Uncertainty remains over the prospects for resolution of the banking & sovereign debt issues in Europe.

“Australia’s terms of trade are reaching higher levels than assumed a few months ago and national income is growing strongly. Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices. In the household sector thus far, in contrast, there continues to be caution in spending & borrowing and a higher rate of saving out of current income.

“The natural disasters over the summer have reduced output in some key sectors and the resumption of coal production in flooded mines is taking longer than initially expected. It is likely this caused a decline in real gdp in the March quarter. Production levels should, however, recover over the months ahead and there will be a mild boost to demand from the rebuilding efforts as they get under way. Over the medium term, overall growth is likely to be at trend or higher.

“Growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5%. Most leading indicators suggest further growth in employment, though most likely at a slower pace than in 2010. Reports of skills shortages remain confined, at this point, to the resources & related sectors.

“After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn. Overall credit growth remains quite modest. Signs have continued to emerge of some greater willingness to lend, and business credit has resumed growth after a period of contraction. Growth in credit to households, on the other hand, has softened recently, as have housing prices in several cities. The exchange rate has risen further and, in real effective terms, is at its highest level in several decades. This, if sustained, could be expected to exert additional restraint on the traded sector.

“Recent data on inflation show the effects of production losses due to the floods & Cyclone Yasi. The affected prices should fall back later in the year, though substantial rises in utilities prices are still occurring. The bank expects that, as the temporary price shocks dissipate over the coming quarters, CPI inflation will be close to target over the year ahead.

“Looking through these short-term movements, however, the recent information suggests that the marked decline in underlying inflation from the peak in 2008 has now run its course. While the rising exchange rate will be helping to hold down prices for some consumer products over the coming few quarters, over the longer term inflation can be expected to increase somewhat if economic conditions evolve broadly as expected.”

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australian Reserve Bank sticks with “mildly restrictive”

Published 5 April 2011

The Reserve Bank of Australia’s board decided to leave its cashrate unchanged at 4.75% today.

 

Bank governor Glenn Stevens said: “The global economy is continuing its expansion, led by very strong growth in the Asian region. The recent disaster in Japan will have a noticeable effect on Japanese production in the near term, although the impact on the broader Asian region is expected to be limited. Commodity prices, including oil prices, have risen over recent months, pushing up measures of consumer price inflation in many countries. A number of countries have been moving to tighten their monetary policy settings. Overall, though, financial conditions for the global economy remain accommodative.

 

“Australia’s terms of trade are at their highest level since the early 1950s and national income is growing strongly. Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices. In the household sector thus far, in contrast, there continues to be caution in spending & borrowing and a higher rate of saving out of current income. The natural disasters over the summer have reduced output and the resumption of coal production in flooded mines is taking longer than initially expected. Production levels should, however, recover over the months ahead and there will be a mild boost to demand from the rebuilding efforts as they get under way.

 

“Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend. Business balance sheets generally are being strengthened and the run‑up in household leverage has abated.

 

“Growth in employment has moderated over recent months and the unemployment rate has held steady at 5%. Most leading indicators suggest further growth in employment, though most likely at a slower pace than in 2010. Reports of skills shortages remain confined, at this point, to the resources & related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.

 

“Inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008. These moderate outcomes are being assisted by the high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices. Production losses due to weather are temporarily raising prices for some agricultural produce, which will boost the March quarter CPI, but these prices should fall back later in the year. Overall, looking through these temporary effects, the bank expects that inflation over the year ahead will continue to be consistent with the 2–3% target.

 

“At today’s meeting, the board judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook.”

 

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading

Australian Reserve Bank holds cashrate, happy being “mildly restrictive”

Published 1 March 2011

The Reserve Bank of Australia lefts its cashrate unchanged at 4.75% today.

Bank governor Glenn Stevens said a “mildly restrictive stance” remained appropriate and that inflation over the year ahead continued to be consistent with the 2-3% target.

Mr Stevens said: “The global economy is continuing its expansion, led by very strong growth in the Asian region. Commodity prices have risen further over recent months, pushing up measures of consumer price inflation in many countries. A number of countries have been moving to tighten their monetary policy settings. Overall, though, financial conditions for the global economy remain accommodative.

“Australia’s terms of trade are at their highest level since the early 1950s and national income is growing strongly. Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices. In the household sector thus far, in contrast, there continues to be caution in spending & borrowing and a higher rate of saving out of current income.

“The effects of the natural disasters over the summer have reduced output, but production levels should recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way.

“Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend. Business balance sheets generally are being strengthened, and the run-up in household leverage has abated.

“The labour market firmed in 2010, with unusually strong growth in employment and a decline in the rate of unemployment. Most leading indicators suggest further growth in employment, though most likely at a slower pace. Reports of skills shortages remain confined, at this point, to the resources & related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.

“Inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008. These moderate outcomes are being assisted by the high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices.

“Production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year. Overall, looking through these temporary effects, the bank expects that inflation over the year ahead will continue to be consistent with the 2–3% target.

“At today’s meeting, the board judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook.”

Want to comment? Go to the forum.

 

Attribution: Bank release, story written by Bob Dey for the Bob Dey Property Report.

Continue Reading
WordPress Appliance - Powered by TurnKey Linux