Statement by Philip Lowe, Governor: Monetary Policy Decision - October 2016 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2016-10-04

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
4 October 2016
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per
The global economy is continuing to grow, at a lower than average pace. Labour market
conditions in the advanced economies have improved over the past year, but growth in
global industrial production and trade remains subdued. Actions by Chinese policymakers
have been supporting growth, but the underlying pace of growth in China has been
moderating. Inflation remains below most central banks' targets.
Commodity prices have risen over recent months, following the very substantial declines
over the past few years. The higher commodity prices have supported a rise in Australia's
terms of trade, although they remain much lower than they have been in recent years.
Financial markets have continued to function effectively. Funding costs for high-quality
borrowers remain low and, globally, monetary policy remains remarkably accommodative.
Government bond yields are near their historical lows.
In Australia, the economy is continuing to grow at a moderate rate. The large decline in
mining investment is being offset by growth in other areas, including residential
construction, public demand and exports. Household consumption has been growing at a
reasonable pace, but appears to have slowed a little recently. Measures of household and
business sentiment remain above average.
Labour market indicators have been somewhat mixed. The unemployment rate has fallen
further, although there is considerable variation in employment growth across the
employment has been growing strongly, while growth in full-time
employment has been subdued. The forward-looking indicators point to continued expansion
in employment in the near term.
Inflation remains quite low. Given very subdued growth in labour costs and very low cost
pressures elsewhere in the world, this is expected to remain the case for some time.
Low interest rates have been supporting domestic demand and the lower exchange rate
since 2013 has been helping the traded sector. Financial institutions are in a position
to lend for worthwhile purposes. These factors are all assisting the economy to make the
necessary economic adjustments, though an appreciating exchange rate could complicate
Supervisory measures have strengthened lending standards in the housing market.
Separately, a number of lenders are also taking a more cautious attitude to lending in
certain segments. Growth in lending for housing has slowed over the past year. Turnover
in the housing market has declined. The rate of increase in housing prices is lower than
it was a year ago, although some markets have strengthened recently. Considerable supply
of apartments is scheduled to come on stream over the next couple of years, particularly
in the eastern capital cities. Growth in rents is the slowest for some decades.
Taking account of the available information, and having eased monetary policy at its May
and August meetings, the Board judged that holding the stance of policy unchanged at
this meeting would be consistent with sustainable growth in the economy and achieving
the inflation target over time.