-Glenn Stevens, RBA Governor
Reserve Bank of Australia Governor Glenn Stevens said an interest-rate cut remains "on the table," while adding that the depreciation of the Aussie Dollar is having an expansionary effect on the nation's economy. The Australian Dollar has declined from above parity with the US counterpart in 2013 to around $0.75 recently, but has fallen less on a trade-weighted basis. The RBA lowered borrowing costs twice this year to a historic-low 2% as it aimed to accelerate a transition toward service industries and manufacturing as a decade-long mining boom fades. However, the easy policy is fuelling a housing bubble in Sydney and Melbourne. Hence, the central bank would prefer a weaker currency to boost the competitiveness of local industries.
Inflation data released earlier showed Australia's CPI climbing 0.7% in the June quarter, accelerating from 0.2% in the previous three-month period. When measured on an annual basis, consumer inflation rose 1.5%, compared with 1.3% in the first quarter. Automotive fuel contributed significantly to the increase in consumer prices in the reported period, partly being offset by falling prices for domestic holiday travel and accommodation. Meanwhile, core inflation, which strips out volatile components, edged higher by an average 0.6% in the second quarter from the first.
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