Statement by Glenn Stevens, Governor: Monetary Policy - April 2009 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2009-04-07

Media Release
Statement by Glenn Stevens, Governor: Monetary Policy
7 April 2009
At its meeting today, the Board decided to lower the cash rate by 25 basis points
to 3.0 per cent, effective 8 April 2009.
Recent information from abroad indicates that the contraction in the global economy
continued during the first few months of this year, and most assessments
of the near-term outlook have been further marked down. Considerable economic
policy stimulus is in train in most countries, the full effects of which
are not yet discernible, but which should help contain the downturn over
the rest of the year. There are tentative signs of stabilisation in several
countries, including China, though it is too early yet to judge how durable
these will prove to be.
Conditions in global financial markets have continued to improve gradually, helped
by progress towards a resolution of banking system difficulties in the United
States and other major countries. Sentiment remains fragile, however, and
the contraction in economic activity is affecting asset quality of financial
institutions.
The Australian economy is contracting, though by less than those of its trading partners.
Capacity utilisation has fallen from its peak, and will decline further over
the rest of the year. With demand for labour weakening, growth in labour
costs will probably also fall. Hence inflation over the medium term is likely
to be lower than it has been over the past two years. Demand for credit is
weak overall, though credit for owner-occupied housing is picking up.
There has already been a major change in both monetary and fiscal policy in Australia.
Market and mortgage rates are at very low levels by historical standards
and business loan rates are below recent averages, reducing debt-servicing
burdens considerably. Nonetheless, the Board judged that there was scope
for a further modest adjustment to the cash rate. The stance of monetary
policy, together with the substantial fiscal initiatives, will provide significant
support to domestic demand over the period ahead.
Dr Malcolm Edey
Assistant Governor (Economic)
Phone: +61 2 9551 8800
Dr Guy Debelle
Assistant Governor (Financial Markets)
Phone: +61 2 9551 8200
Media Office
Information Department