Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


RBA cuts key rate to 3 percent on subdued economic outlook

RBA cuts key rate to 3 percent on subdued labour market, below average global growth

Dec. 4 (BusinessDesk) – The Reserve Bank of Australia cut its key rate a quarter point as expected, saying there’s a risk below-average global growth slows further while at home the labour market is subdued and capital spending on resources is peaking.

The central bank lowered the cash rate to 3 percent from 3.25 percent to “help to foster sustainable growth in demand and inflation outcomes consistent with the target over time.”

The Australian dollar rose immediately after the announcement to US$1.0446 fr9om US$1.0417, while the New Zealand dollar rose to US82.29 cents, from 82.04 cents just before the RBA decision was announced.

Risks to the outlook for global growth “are still seen to the downside, largely as a result of the situation in Europe, though the uncertainty over the course of US fiscal policy is also weighing on sentiment at present,” governor Glenn Stevens said in a statement.

That’s the first time he’s made mention of the US fiscal position since his August 2 statement last year, when the US Congress stalled on agreeing to lift the debt ceiling and America’s credit rating got downgraded. Republicans and the White House are again at odds as the deadline looms for the fiscal cliff, which could stall the world’s biggest economy.

In Australia, most indicators suggest economic growth is running close to trend, with large increases in capital spending in the resources sector and “weaker conditions” in other sectors.

“Looking ahead, recent data confirm that the peak in resource investment is approaching,” Stevens said.

While private consumption is expected to grow, a return to the very strong growth of some years ago is unlikely, he said. Investment outside the resources sector remains relatively subdued and public spending is forecast to be constrained.

Stevens did note signs of improvement in the property market, with home prices rising, rental yields rising and an increase in building approvals.

Inflation is consistent with the bank’s medium-term target, at around 2.5 percent on an underlying basis, though headline inflation may briefly rise above 3 percent, partly as a result of the introduction of a carbon tax, Stevens said.

“Looking further ahead, with the labour market softening somewhat and unemployment edging higher, conditions are working to contain pressure on labour costs,” he said.

While monetary policy has become “more accommodative” over the past year, as the bank lowered the cash rate, the Australian dollar “remains higher than might have been expected, given the observed decline in export prices and the weaker global outlook,” he said.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

China Shopping: NZ-China FTA Upgrade Agreed Among Slew Of New Deals

New Zealand Prime Minister Bill English and China Premier Li Keqiang signed off a series of cooperation deals spanning trade, customs, travel and climate change and confirmed commencement of official talks on an upgrade to the nine-year old free-trade agreement between the two countries. More>>

ALSO:


Media: TVNZ Flags Job Cuts To Arrest Profit Decline

Chief executive Kevin Kenrick said the changes were aimed at creating "a sustainable future video content business for TVNZ in an ever-changing media market." More>>

ALSO:

Reserve Bank: Wheeler Keeps OCR At 1.75%

Reserve Bank governor Graeme Wheeler kept the official cash rate unchanged at 1.75 percent, as expected, and reiterated his view that the benchmark rate doesn't need shifting for the foreseeable future. More>>

ALSO:

Trade Plans: Prime Minister's Speech To International Business Forum

"The work to improve public services, build infrastructure, and solve social problems is possible only because we have enjoyed sustained, solid economic growth. A big reason for that is the Government’s consistent agenda of economic reform, and our determination to open up more opportunities for trade with the world." More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news