- Glenn Stevens, RBA Governor
The Reserve Bank of Australia kept interest rates on hold at 2% after the recent stock market turmoil as a weaker Australian Dollar and past rate cuts have a positive impact on growth. The central bank said the Australian Dollar was adjusting to the significant drops in key commodity prices. Since the August meeting, the Aussie has lost 2.5% versus the US Dollar and 1% on a trade weighted basis. Meanwhile, the price of iron ore, Australia's biggest export, has jumped 5%. At the same time, there have been signs that the Fed may postpone its widely anticipated September rate hike due to ongoing concerns about cooling China's economic growth and turbulence in global equity markets. Economists believe the longer the US central bank holds off lifting rates, the greater the chances of further easing from the RBA. Yet, most analysts expect Australia's central bank to remain on hold for a while now, with a small share expecting one more cut, and markets pricing in around 30 basis-points cut in the year ahead.
Meanwhile, Australia's building approvals rebounded from June's decline and are predicted to remain strong for the remainder of the year. Approvals for the construction of new homes rose 4.2% in July, after falling 5.2% in June, driven by a 13.3% drop in the volatile multi-unit dwellings. Over the 12 months to July, building approvals were up 13.4%, the Australian Bureau of Statistics reported.
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