Statement by Glenn Stevens, Governor: Monetary Policy Decision - June 2014 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2014-06-03

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
3 June 2014
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per
Growth in the global economy is continuing at a moderate pace, helped by firmer conditions
in the advanced countries. China's growth appears to have slowed a little
in early 2014 but remains generally in line with policymakers' objectives.
Commodity prices in historical terms remain high, but some of those important
to Australia have continued to decline of late.
Financial conditions overall remain very accommodative. Long-term interest rates
have fallen further and risk spreads remain low. Emerging market economies
are once again receiving capital inflows. Volatility in many financial prices
is currently unusually low. Markets appear to be attaching a very low probability
to any rise in global interest rates over the period ahead.
In Australia, the economy grew at a below-trend pace in 2013 overall, but growth
looks to have been somewhat firmer around the turn of the year. This has
resulted partly from very strong increases in resource exports as new capacity
has come on stream, but smaller increases in such exports are likely in coming
quarters. Moderate growth has been occurring in consumer demand and a strong
expansion in housing construction is now under way. At the same time, resources
sector investment spending is set to decline significantly. Signs of improvement
in investment intentions in some other sectors are emerging, but these plans
remain tentative, as firms wait for more evidence of improved conditions
before committing to significant expansion. Public spending is scheduled
to be subdued.
There has been some improvement in indicators for the labour market in recent months,
but it will probably be some time yet before unemployment declines consistently.
Recent data confirm that growth in wages has declined noticeably. If these
and other domestic costs remain contained, inflation should remain consistent
with the target over the next one to two years, even with lower levels of
the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and for some borrowers
have edged lower over recent months. Savers continue to look for higher returns
in response to low rates on safe instruments. Credit growth has picked up
a little. Dwelling prices have increased significantly over the past year,
though there have been some signs of a moderation in the pace of increase
recently. The earlier decline in the exchange rate is assisting in achieving
balanced growth in the economy, but less so than previously as a result of
the higher levels over the past few months. The exchange rate remains high
by historical standards, particularly given the further decline in commodity
Looking ahead, continued accommodative monetary policy should provide support to
demand, and help growth to strengthen over time. Inflation is expected to
be consistent with the 2–3 per cent target over the next two years.
In the Board's judgement, monetary policy is appropriately configured to foster
sustainable growth in demand and inflation outcomes consistent with the target.
On present indications, the most prudent course is likely to be a period
of stability in interest rates.
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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