Statement by Philip Lowe, Governor: Monetary Policy Decision - September 2019 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2019-09-03

Media Release
Statement by Philip Lowe, Governor: Monetary Policy Decision
3 September 2019
At its meeting today, the Board decided to leave the cash rate unchanged at
1.00 per cent.
The outlook for the global economy remains reasonable, although the risks are tilted to the downside.
The trade and technology disputes are affecting international trade flows and investment as businesses
scale back spending plans due to the increased uncertainty. At the same time, in most advanced
economies, unemployment rates are low and wages growth has picked up, although inflation remains low. In
China, the authorities have taken further steps to support the economy, while continuing to address
risks in the financial system.
Global financial conditions remain accommodative. The persistent downside risks to the global economy
combined with subdued inflation have led a number of central banks to reduce interest rates this year
and further monetary easing is widely expected. Long-term government bond yields have declined and are
at record lows in many countries, including Australia. Borrowing rates for both businesses and
households are also at historically low levels. The Australian dollar is at its lowest level of recent
Economic growth in Australia over the first half of this year has been lower than earlier expected,
with household consumption weighed down by a protracted period of low income growth and declining
housing prices and turnover. Looking forward, growth in Australia is expected to strengthen gradually to
be around trend over the next couple of years. The outlook is being supported by the low level of
interest rates, recent tax cuts, ongoing spending on infrastructure, signs of stabilisation in some
established housing markets and a brighter outlook for the resources sector. The main domestic
uncertainty continues to be the outlook for consumption, although a pick-up in growth in household
disposable income and a stabilisation of the housing market are expected to support spending.
Employment has grown strongly over recent years and labour force participation is at a record high. The
unemployment rate has, however, remained steady at 5.2 per cent over recent months. Wages
growth remains subdued and there is little upward pressure at present, with strong labour demand being
met by more supply. Caps on wages growth are also affecting public-sector pay outcomes across the
country. A further gradual lift in wages growth would be a welcome development. Taken together, recent
labour market outcomes suggest that the Australian economy can sustain lower rates of unemployment and
underemployment.
Inflation pressures remain subdued and this is likely to be the case for some time yet. In both
headline and underlying terms, inflation is expected to be a little under 2 per cent over 2020
and a little above 2 per cent over 2021.
There are further signs of a turnaround in established housing markets, especially in Sydney and
Melbourne. In contrast, new dwelling activity has weakened. Growth in housing credit remains low. Demand
for credit by investors continues to be subdued and credit conditions, especially for small and
medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition
for borrowers of high credit quality.
It is reasonable to expect that an extended period of low interest rates will be required in Australia
to make progress in reducing unemployment and achieve more assured progress towards the inflation
target. The Board will continue to monitor developments, including in the labour market, and ease
monetary policy further if needed to support sustainable growth in the economy and the achievement of
the inflation target over time.
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