At its June monetary policy meeting on Tuesday, the Reserve Bank of Australia decided to leave the cash rate steady at 2.0 per cent. The decision was unsurprising for the market, as the RBA had already cut interest rates in the previous month. In May, the board members of the central bank cut Australia’s cash rate to a historic low of 2.0 per cent. It cited economic concerns in both China and Australia as the reason for the interest rate reduction.
The board members were generally unspecific in regards to economic outlook and the future timing of additional interest rate cuts. However, the governing body said it would leave the door open for future interest rate cuts. The statement released by the RBA said “information on economic and financial conditions to be received over the period ahead will inform the Board’s assessment of the outlook and hence whether the current stance of policy will be most effectively foster sustainable growth and inflation consistent with the target.”
One positive outcome of the previous interest rate cut was the deprecation of the Australian relative to the US dollar. Compared to other currencies, it has weakened less so than other major currencies, but the RBA believes it has weakened enough to give a boost to consumer spending and exports. The board did cite concerns in capital expenditures and wage growth, saying that growth in these two sectors will drag GDP growth below long-run averages. Some speculation has arisen from economists that Australia may not need to cut interest rates further as the US prepares to raise its own interest rates.
Author: Matthew Dibb
Jun 02, 2015
Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.