The Reserve Bank of Australia (RBA), which cut its rate by 25 basis points in February and was expected by many economists to again cut its rate today, said it had decided to keep rates steady in light of last month's easing but would assess the case for further cuts "at forthcoming meetings."
As in February, the RBA said economic growth in Australia remained below trend with quite weak growth in domestic demand, resulting in an increase in the jobless rate, and a degree of spare capacity for some time yet.
As in other advanced economies, growth in Australian labour costs remain subdued, and together with the sharp fall in oil prices, this will result in lower inflation rates.
In his statement, RBA Governor Glenn Stevens again called for a further decline in the exchange rate of the Australian dollar in order to achieve balanced growth, saying the dollar remains above most estimates of its fundamental value despite a noticeable decline against a rising U.S. dollar.
Australia's consumer price inflation rate dropped to 1.7 percent in the fourth quarter of 2014, below the RBA's 2-3 percent target, but Stevens said he still expects inflation to remain consistent with the bank's target over the next one to two years, even with a lower exchange rate.
Wages in Australia rose by only 2.5 percent in the fourth quarter of last year from the same period in 2013, down from 2.6 percent in the third quarter and the lowest rate in 17 years. The unemployment rate hit a 12-year high of 6.4 percent in January, up from December's 6.1 percent.
The Australian dollar, known as the aussie, has been depreciating against the U.S. dollar since September last year but has stabilized in the last month. Today it was trading at 1.278 to the U.S. dollar, down 4.2 percent this year and down 16.5 percent since September 2014.
The Reserve Bank of Australia issued the following statement by its governor, Glenn Stevens: