Statement by Glenn Stevens, Governor: Monetary Policy - March 2009 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2009-03-03

Media Release
Statement by Glenn Stevens, Governor: Monetary Policy
3 March 2009
At its meeting today, the Board decided to leave the cash rate unchanged at 3.25
Recent data confirm that the world economy has remained very weak following the sharp
decline in demand that occurred late last year. The major industrial economies
reported large contractions in output in the December quarter, as did a number
of emerging market economies across Asia and eastern Europe. Many countries
are likely to be experiencing further falls in output in the current quarter.
Conditions in global credit markets have improved since November, but sentiment remains
fragile. Share prices have weakened and banking systems in several major
countries are still under pressure, as authorities work towards a resolution
of the balance-sheet problems. Significant macroeconomic policy stimulus
is being put in place around the world, but it is too soon to see the effects
of those measures.
In Australia, demand has not weakened as much as in other countries and, on the basis
of currently available information, the Australian economy has not experienced
the sort of large contraction seen elsewhere. The Australian financial system
remains strong and the monetary policy transmission process is working to
deliver large reductions in interest rates to end borrowers. Nonetheless,
economic conditions are clearly weak, and given the speed and scale of the
global economic deterioration and its effect on confidence, weak conditions
are likely to continue in the near term. Inflation is likely to decline over
In response to that outlook, there has already been a major change in both monetary
and fiscal policy. 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. Together with the substantial fiscal initiatives, the
cumulative decline in interest rates will provide significant support to
domestic demand over the period ahead. On this basis, notwithstanding evident
economic weakness at present, the Board judged that the stance of monetary
policy was appropriate for the moment. The Board will consider the position
again at its next meeting.
Dr Malcolm Edey
Assistant Governor (Economic)
Phone: +61 2 9551 8800
Dr Guy Debelle
Assistant Governor (Financial Markets)
Phone: +61 2 9551 8200
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