"With growth currently on the soft side, the real exchange rate still strong and efforts to reduce the budget deficit likely, monetary policy should remain accommodative and act as the primary macroeconomic tool for managing aggregate demand in the near term"
- International Monetary Fund
The International Monetary Fund said the monetary policy in Australia should remain accommodative and act as the main tool to manage aggregate demand in the near term, even as a weaker Australian Dollar remains a key factor for achieving a broad-based economic pickup. The IMF assessment came inline with the Reserve Bank of Australia's monetary policy, which changed its stance from easing to neutral earlier this month. This would mean that the interest rate would remain at the record-low level of 2.5% for the coming months at least. The IMF also said the fundamentals of Australia's economy remains solid, but its near-term outlook remains vulnerable to terms-of-trade shocks and downside risks.
Meanwhile, official data showed today that Australian labour market deteriorated further, with unemployment rate hitting the highest level in over ten years last month. The nation's jobless rate rose to 6.0% in January up from 5.8% a month earlier, while analysts had predicted 5.9%. Also, participation in the labour market fell to the lowest level since June 2006, declining from 64.6% to 64.5% in January. Meanwhile, Australian are expecting prices to rise at a steady rate of 2.3% over the next 12 months, in line with the central bank's target band.
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