The RBA has decided to leave the cash rate unchanged again in June.
At its meeting today the board affirmed the cash rate of 4.75%, and noted that the global economy is continuing its expansion. This is being led by strong growth in Asia but mitigated somewhat by production issues in Japan.
While commodity prices remain very high, pushing up measures of consumer price inflation and leading some countries to tighten monetary policy, overall financial conditions remain “accommodative,” according to RBA governor of monetary policy decision Glenn Stevens.
Private investment is meanwhile picking up in Australia, predictably led by the resources sector, Stevens said in a statement.
But spending and borrowing remains depressed in the household sector, Stevens said, and real GDP fell sharply in the March quarter on natural disaster impacts.
Despite the hiccup, the RBA expects overall real GDP growth to be at trend or higher over the medium term as the impact mitigates.
Stevens added that most indicators suggest that the slower pace of employment growth – as evidenced by the decline in job ads last month – is likely to continue in the near term.
While CPI inflation has risen in the last year due to the disasters and increases in utilities prices, RBA expects the weather-effected prices to fall back to close to target over the next 12 months.
As a result, the board decided to stay the course with its monetary policy for now.
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