The Reserve Bank has raised the cash rate for the third consecutive month. The rise of 25 basis points takes the rate to 3.75 percent, effective from tomorrow.
In a statement, RBA governor Glenn Stevens said they decided to raise the rates because the downturn has been “relatively mild, and measures of confidence and business conditions suggest that the economy is in a gradual recovery”.
Stevens also noted that although the effects of the government’s stimulus measures had faded, public infrastructure spending had begun to boost demand. “Prospects for ongoing expansion of private demand, including business investment, have been strengthening. There have been some early signs of an improvement in labour market conditions,” he added.
His assessment of the Australian economy was largely positive, with inflation remaining steady and credit for housing increasing. However, he admitted: “Business credit has fallen, as companies have reduced leverage in an environment of tighter lending standards, and as some lenders have scaled back their balance sheets.”