Statement by Glenn Stevens, Governor: Monetary Policy - July 2009 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2009-07-07

Media Release
Statement by Glenn Stevens, Governor: Monetary Policy
7 July 2009
At its meeting today, the Board decided to leave the cash rate unchanged at 3.0 per cent.
The global economy is stabilising, after a sharp contraction in demand during the
December and March quarters.  Downside risks to the outlook have diminished,
with conditions in global financial markets improving this year and action
to strengthen balance sheets of key financial institutions under way. Growth
in China has strengthened considerably, which is having an impact on other
economies in the region, including Australia.
Nonetheless, credit conditions remain tight and the effects of economic weakness
on asset quality present a challenge. There is tentative evidence that the
US economy is approaching a turning point, but conditions in Europe are still
weakening.  While the considerable economic policy stimulus in train
around the world should support recovery, it is likely to be slow at first.
For it to be durable, continued progress in restoring balance sheets is essential.
Economic conditions in Australia have to date not been as weak as expected a few
months ago. But output has been sluggish and capacity utilisation has fallen
back to about average levels, with some further decline likely over the rest
of the year.  Weaker demand for labour is leading to lower growth in
labour costs. These conditions should see inflation continue to abate over
the period ahead.
A pick-up in housing credit demand suggests stronger dwelling activity is likely
later in the year. House prices are tending to rise. Business borrowing,
on the other hand, has been declining, as companies postpone investment plans
and seek to reduce leverage in an environment of tighter lending standards.
Large firms have had good access to equity capital, which is assisting in
strengthening their financial structures.
Monetary policy has been eased significantly.  Market and mortgage rates are
at very low levels by historical standards, despite recent small increases.
Business loan rates are below average.  The effects of these changes
will still be coming through for some time yet. Fiscal measures are also
providing considerable support for demand.
The Board's current view is that the outlook for inflation allows some scope
for further easing of monetary policy, if needed.  In assessing how
it might use that scope, the Board will continue to monitor how economic
and financial conditions unfold and how they impinge on prospects for a sustainable
recovery in economic activity.
Dr Philip Lowe
Assistant Governor (Economic)
Phone: +61 2 9551 8800
Dr Guy Debelle
Assistant Governor (Financial Markets)
Phone: +61 2 9551 8200
Media Office
Information Department