Statement by Glenn Stevens, Governor: Monetary Policy Decision - April 2013 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2013-04-02

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
2 April 2013
At its meeting today, the Board decided to leave the cash rate unchanged at 3.0 per
Global growth is forecast to be a little below average for a time, but the downside
risks appear to be reduced. While Europe remains in recession, the United
States is experiencing a moderate expansion and growth in China has stabilised
at a fairly robust pace. Around Asia generally, growth was dampened by the
earlier slowing in China and the weakness in Europe, but again there are
signs of stabilisation. Commodity prices have declined somewhat recently,
but are still at historically high levels.
Internationally, financial conditions are very accommodative. Risk spreads are narrow
and funding conditions for financial institutions have improved. Long-term
interest rates faced by highly rated sovereigns, including Australia, remain
at exceptionally low levels. Borrowing conditions for large corporations
are similarly very attractive. Share prices are substantially above their
low points. However, the task of putting private and public finances on sustainable
paths in several major countries is far from complete. Accordingly, financial
markets remain vulnerable to setbacks.
In Australia, growth was close to trend over 2012, led by very large increases in
capital spending in the resources sector, while some other sectors experienced
weaker conditions. Looking ahead, the peak in resource investment is drawing
close. There will, therefore, be more scope for some other areas of demand
to strengthen.
Recent information suggests that moderate growth in private consumption spending
is occurring, though a return to the very strong growth of some years ago
is unlikely. While the near-term outlook for investment outside the resources
sector is relatively subdued, a modest increase is likely to begin over the
next year. Dwelling investment is slowly increasing, with rising dwelling
prices and high rental yields. Exports of natural resources are strengthening.
Public spending, in contrast, is forecast to be constrained.
Inflation is consistent with the medium-term target, with both headline CPI and underlying
measures at around 2¼ per cent on the latest reading. Labour costs
remain contained and businesses are focusing on lifting efficiency. These
trends should help to keep inflation low, even as the effects on prices of
the earlier exchange rate appreciation wane. The Bank's assessment remains
that inflation will be consistent with the target over the next one to two
There are a number of indications that the substantial easing of monetary policy
during late 2011 and 2012 is having an expansionary effect on the economy.
Further such effects can be expected to emerge over time. On the other hand,
the exchange rate, which has risen recently, remains higher than might have
been expected, given the observed decline in export prices. The demand for
credit has also remained low thus far, as some households and firms continue
to seek lower debt levels.
The Board's view is that with inflation likely to be consistent with the target,
and with growth likely to be a little below trend over the coming year, an
accommodative stance of monetary policy is appropriate. The inflation outlook,
as assessed at present, would afford scope to ease policy further, should
that be necessary to support demand. At today's meeting, the Board judged
that it was prudent to leave the cash rate unchanged. The Board will continue
to assess the outlook and adjust policy as needed to foster sustainable growth
in demand and inflation outcomes consistent with the target over time.
Dr Christopher Kent
Assistant Governor (Economic)
Phone: +61 2 9551 8800
Dr Guy Debelle
Assistant Governor (Financial Markets)
Phone: +61 2 9551 8200
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