"It was appropriate to hold the cash rate steady but not close off the possibility of reducing it further should that be needed to support economic activity."
- The Reserve Bank of Australia
Following the gloomy forecasts for the Eurozone from Mario Draghi, the Australian central bank shared pessimism after an unbelievingly disappointing quarterly statement on the monetary policy. Despite significant improvement in business and consumer mood, the Reserve Bank of Australia expects below-trend economic growth, while the unemployment is seen rising in 2014, outlining the state of domestic economy as it begins the phase of the transition away from a mining-led boom to a growth led by other sectors. The resource-rich economy is now expected to grow between 2% and 3% in the year to December 2014, compared with a range of 2.5%- 3.5% seen three months ago. Inflation is likely to remain consistent, hovering around 2%-3% target. Even though the outlook remains grim, the RBA sees evidence that previous rate cuts have been working to push higher interest-sensitive spending, however, the effects still have to spread through the economy.
The RBA did not forget to mention the overvalued Aussie as well, saying they do not rule out the possibility of more cash rate cuts, however, they are hoping that a much lower domestic currency would save them from this unpopular decision. The Aussie fell versus the greenback in the first half of this year, however, due to the government shutdown in the United States, the pair soared once again.