-Craig James, a senior economist at a unit of Commonwealth Bank of Australia
During its monthly policy meeting, the Reserve Bank of Australia led by the Governor Glenn Stevens and his board decided to keep the overnight cash-rate target at 2.75%, as the central bank assesses the effect on the economy of a series of previous cuts. The result came in line with analysts' expectations, who expected the rate to remain at a 53-year low. During the last 20 months, the RBA cut the benchmark interest rate by 2% and this measure boosted the property market, while a 7.7% decline in the Aussie helped buoy manufacturing sentiment. Australian policy makers are trying to switch growth toward industries like construction in the nation's south and east regions, as well as push hiring as mining investment is expected to peak later this year.
The report also showed the RBA's readiness to cut rate further as the nation's exchange rate still remains high even after the biggest monthly drop since 2011. In the meantime, even as the outlook published by the RBA last month is still for a same performance in the short term, Australian growth rate over the past year has been below the trend. The unemployment rate edged higher, while inflation is expected to remain weak over the next one to two years.
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