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RBA considers rates to be appropriate

RBA considers rates to be appropriate

The Reserve Bank of Australia (RBA) is confident that interest rates are at an appropriate level for the time being.

Minutes of the RBA's latest board meeting, published on Tuesday, show that the board considers interest rates on both housing and business loans to be a little above average. But the board felt this was appropriate so as to ensure a consistent medium-term inflation outlook.

At the April 5 meeting the board, which elected to leave the cash rate unchanged, considered Australia's 0.7% GDP growth in the December quarter and found this in line with expectations.

But the board noted continued spending restraints in the household sector, declining consumer sentiment, and a “mixed picture” in the latest business indicators.

For example, while business investment had increased, most of this was in the resources sector, and investment growth in other sectors was expected to be relatively modest.

While domestic employment growth had slowed somewhat from levels seen in 2010, the RBA said the outlook for the labour market remained positive.

RBA predicted that the effects of the Japanese disasters on that country's economy would be more severe than those of the 1995 Kobe earthquake, but said Australian exports could be boosted – after an initial disruption – by the rebuilding efforts.

Only one third of Australian CFOs expect the RBA to raise rates in the September quarter, according to the results of a survey conducted by Deloitte.

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Tags official cash rateinflationReserve Bank of Australiaeconomic outlookInterest rates

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