Interest Rate Update

14/09/2012 Level One

The Reserve Bank of Australian on 4th September 2012 decided to leave the cash rate unchanged at 3.50%.

Glenn Stevens, Governor made comments regarding the RBA’s monetary policy decisions that, due to inflation expected to be consistent with the target and growth close to trend, the stance of their policy remained appropriate.

Mr Stevens has reported that financial markets have responded positively over the past couple of months to signs of progress in addressing Europe’s financial problems, but expectations for further progress are high. Low appetite for risk has seen long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Nonetheless, capital markets remain open to corporations and well-rated banks, and Australian banks have had no difficulty accessing funding, including on an unsecured basis. Share markets have generally risen over the past couple of months, on very light volumes.

As a result of the sequence of earlier decisions, interest rates for borrowers are a little below their medium-term averages. The impact of those changes is still working its way through the economy, but dwelling prices have firmed a little and business credit has picked up this year. The exchange rate has declined over the past month or two, though it has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook.

The next RBA meeting is 2nd October 2012.


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