The Reserve Bank has decided to leave the cash rate at 4.75%, announced RBA governor Glenn Stevens.
High terms of trade and growth in national income have been balanced by the impact of the floods and cyclones over the Australian summer, which are still affecting economic growth.
“The floods and cyclones over the summer have reduced output in some key sectors,” said Stevens. “As a result there was a sharp fall in real GDP in the March quarter, despite a solid increase in aggregate demand.”
For businesses, credit growth remains “modest”, although “signs have continued to emerge of some greater willingness to lend, and business credit has expanded this year after a period of contraction,” added the governor. This is in contrast to private lending, which has softened along with housing prices.
The resources sector has led the investment stakes, although commodity prices have plateaued, Stevens reported. However, outside the resources sector, “investment intentions have been revised lower recently”.
The unemployment rate has remained steady at almost 5%, which indicates a slowing pace of employment growth. “Reports of skills shortages remain confined, at this point, to the resources and related sectors,” said Stevens.
For importing or exporting businesses, the high Australian dollar is said to be “close to its highest level in several decades”. But Stevens warned: “If sustained, this could be expected to exert continued restraint on the traded sector.”
