The Reserve Bank of Australia (RBA), which has kept its rate steady since lowering it in August 2016, also reiterated its view from last month that business conditions were positive and capacity utilization had increased, with forward-looking indicators more positive than for some time.
In its last statement from Nov. 6, the RBA said the outlook for non-mining investment had "improved," with today's statement adding the word "further."
Australia's economy grew by an annual rate of 1.8 percent in the first and second quarters of this year but RBA said recent data suggested the economy expanded around its trend rate in the third quarter.
Economists are forecasting annual growth over 3 percent in the third quarter after retail sales for October rose 0.5 percent from September, higher than expected and the fastest rate since May.
The RBA's optimism over economic growth was echoed last week by the Organisation for Economic Co-operation and Development (OECD), which called on the central bank to start raising its rate in the second half of next year as wages and prices rise.
Higher rates will also ease the pressure on house prices and reduce the threat of a build-up of financial imbalances, Paris-based OECD said in its latest world economic outlook.
So far, however, there are few signs of price and wage pressure, with Australia's inflation rate down to 1.8 percent in the third quarter from 1.9 percent in the second quarter, below RBA's target of 2 - 3 percent
While unemployment has been declining - it fell to 5.4 percent in October from 5.5 percent in September - wage growth remains low and RBA said it expects this to continue "for a while yet, although stronger conditions in the labour market should see some lift in wage growth over time."
The Reserve Bank of Australia issued the following statement:
"At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
Conditions in the global economy have improved over 2017. Labour markets have tightened and further above-trend growth is expected in a number of advanced economies, although uncertainties remain. Growth in the Chinese economy continues to be supported by increased spending on infrastructure and property construction, although financial conditions have tightened somewhat as the authorities address the medium-term risks from high debt levels. Australia's terms of trade are expected to decline in the period ahead but remain at relatively high levels.
Wage growth remains low in most countries, as does core inflation. In a number of economies there has been some withdrawal of monetary stimulus, although financial conditions remain quite expansionary. Equity markets have been strong, credit spreads have narrowed over the course of the year and volatility in financial markets is low. Long-term bond yields remain low, notwithstanding the improvement in the global economy.
Recent data suggest that the Australian economy grew at around its trend rate over the year to the September quarter. The central forecast is for GDP growth to average around 3 per cent over the next few years. Business conditions are positive and capacity utilisation has increased. The outlook for non-mining business investment has improved further, with the forward-looking indicators being more positive than they have been for some time. Increased public infrastructure investment is also supporting the economy. One continuing source of uncertainty is the outlook for household consumption. Household incomes are growing slowly and debt levels are high.
Employment growth has been strong over 2017 and the unemployment rate has declined. Employment has been rising in all states and has been accompanied by a rise in labour force participation. The various forward-looking indicators continue to point to solid growth in employment over the period ahead. There are reports that some employers are finding it more difficult to hire workers with the necessary skills. However, wage growth remains low. This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time.
Inflation remains low, with both CPI and underlying inflation running a little below 2 per cent. The Bank's central forecast remains for inflation to pick up gradually as the economy strengthens.
The Australian dollar remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.
Growth in housing debt has been outpacing the slow growth in household income for some time. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced a number of supervisory measures. Credit standards have been tightened in a way that has reduced the risk profile of borrowers. Nationwide measures of housing prices are little changed over the past six months, with conditions having eased in Sydney. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Rent increases remain low in most cities.
The low level of interest rates is continuing to support the Australian economy. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time."
0 comments:
Post a Comment