Statement by Glenn Stevens, Governor: Monetary Policy Decision - March 2011 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2011-03-01

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
1 March 2011
At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per
The global economy is continuing its expansion, led by very strong growth in the
Asian region. Commodity prices have risen further over recent months, pushing
up measures of consumer price inflation in many countries. A number of countries
have been moving to tighten their monetary policy settings. Overall, though,
financial conditions for the global economy remain accommodative.
Australia's terms of trade are at their highest level since the early 1950s and
national income is growing strongly. Private investment is picking up, mainly
in the resources sector, in response to high levels of commodity prices.
In the household sector thus far, in contrast, there continues to be caution
in spending and borrowing, and a higher rate of saving out of current income.
The effects of the natural disasters over the summer have reduced output,
but production levels should recover over the months ahead, and there will
be a mild boost to demand from the rebuilding efforts as they get under way.
Asset values have generally been little changed over recent months and overall credit
growth remains quite subdued, notwithstanding evidence of some greater willingness
to lend. Business balance sheets generally are being strengthened, and the
run-up in household leverage has abated.
The labour market firmed in 2010, with unusually strong growth in employment and
a decline in the rate of unemployment. Most leading indicators suggest further
growth in employment, though most likely at a slower pace. Reports of skills
shortages remain confined, at this point, to the resources and related sectors.
After the significant decline in 2009, growth in wages has returned to rates
seen prior to the downturn.
Inflation is consistent with the medium-term objective of monetary policy, having
declined significantly from its peak in 2008. These moderate outcomes are
being assisted by the high level of the exchange rate, the earlier decline
in wages growth and strong competition in some key markets, which have worked
to offset large rises in utilities prices. Production losses due to weather
are temporarily raising prices for some agricultural produce, but these should
fall back later in the year. Overall, looking through these temporary effects,
the Bank expects that inflation over the year ahead will continue to be consistent
with the 2–3 per cent target.
At today's meeting, the Board judged that the current mildly restrictive stance
of monetary policy remained appropriate in view of the general macroeconomic
Dr Philip Lowe
Assistant Governor (Economic)
Phone: +61 2 9551 8800
Dr Guy Debelle
Assistant Governor (Financial Markets)
Phone: +61 2 9551 8200
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