Australia Keeps Interest Rate At Record Low

In addition, he stated that the decision to leave rates unchanged is "consistent with sustainable growth in the economy and achieving the (Bank's) inflation target (of 2 to 3%) over time".

The central bank is considered nearly certain to hold rates at a record low of 1.5 percent, as it balances the risk of fuelling further borrowing in the country's home market against tepid inflation.

"Despite generally soft economic data ... we expect the RBA will wait to see further evidence that the Australian property market is indeed cooling before cutting rates in the second half of this year", Mr Eliseo said. The RBA remained cautious about the labour market, noting that employment growth was "stronger over recent months" but that growth in "total hours worked remains weak".

Governor Philip Lowe said growth was still expected to accelerate above 3 percent in the next couple of years despite probably slowing in the March quarter, citing a broad-based pick-up in the global economy alongside a local improvement in jobs and non-mining investment.

Australia's central bank held interest rates for a 10th month on Tuesday, taking an optimistic tone on the economy even while acknowledging that growth likely slowed last quarter by more than it expected. But he counter-balanced that with a warning: underemployment was keeping a lid on wage gains which in turn is restraining household spending.

The Australian dollar climbed after the rate announcement, hitting 74.87 United States cents, having earlier fallen to a low of 74.57 on weaker-than-expected exports data.

Housing "prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease", said Lowe. Inflation is forecast to increase gradually as the economy strengthens.

The RBA said in minutes from its May meeting that it was closely monitoring the labor and housing markets.

In a move that was widely predicted, the RBA chose to maintain the current official cash rate at its record low of 1.50 per cent.

'They are going to overlook the slowdown in GDP as a temporary blip.

Dr Lowe's post-meeting remarks provided little support for financial market doves betting on further rate cuts, with traders sending the Australian dollar as high as US74.96¢ from a low of US74.57¢ before the meeting.

Economists trimmed their forecasts for first-quarter GDP after an official report showed a fall in the volume of exports detracted 0.7 percentage points from growth, the biggest drag in seven quarters.

  • Anthony Vega