Statement by Philip Lowe, Governor: Monetary Policy Decision - December 2016 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2016-12-06

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
6 December 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. Economic
conditions in China have steadied, supported by growth in infrastructure and property
construction, although medium-term risks to growth remain. Inflation remains below most
central banks' targets, although headline inflation rates have increased recently.
Globally, the outlook for inflation is more balanced than it has been for some time.
Commodity prices have risen over the course of this year, reflecting both stronger
demand and cut-backs in supply in some countries. 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. The higher prices are providing a boost to national
Financial markets are functioning effectively. Government bond yields have risen further
with the adjustment having been orderly. Funding costs for some borrowers have also
risen, but remain low. Globally, monetary policy remains remarkably accommodative.
In Australia, the economy is continuing its transition following the mining investment
boom. Some slowing in the year-ended growth rate is likely, before it picks up again.
Further increases in exports of resources are expected as completed projects come on
line. The outlook for business investment remains subdued, although measures of business
sentiment remain above average.
Labour market indicators continue to be somewhat mixed. The unemployment rate has
declined this year, although some measures of labour underutilisation are little
changed. There continues to be considerable variation in employment outcomes across the
country. Part-time employment has been growing strongly, but employment growth overall
has slowed. The forward-looking indicators point to continued expansion in employment in
the near term.
Inflation remains quite low. The continuing subdued growth in labour costs means that
inflation is expected to remain low for some time, before returning to more normal
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 assisting the economy to make the
necessary adjustments, though an appreciating exchange rate could complicate this.
Conditions in the housing market have strengthened overall, although they vary
considerably around the country. In some markets, prices are rising briskly, while in
others they are declining. Housing credit has picked up a little, although turnover of
established dwellings is lower than it was a year ago. Supervisory measures have
strengthened lending standards and some lenders are taking a more cautious attitude to
lending in certain segments. 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 earlier in
the year, 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.
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