Statement by Philip Lowe, Governor: Monetary Policy Decision - June 2017 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2017-06-06

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
6 June 2017
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The broad-based pick-up in the global economy is continuing. Labour markets have
tightened further in many countries and forecasts for global growth have been revised up
since last year. Above-trend growth is expected in a number of advanced economies,
although uncertainties remain. In China, growth is being supported by increased spending
on infrastructure and property construction, with the high level of debt continuing to
present a medium-term risk. Commodity prices are generally higher than they were a year
ago, providing a boost to Australia's national income. The prices of iron ore and coal,
however, have declined over recent months as expected, unwinding some of the earlier
increases.
Headline inflation rates in most countries have moved higher over the past year, partly
reflecting the higher commodity prices. Core inflation remains low, as do long-term bond
yields. Further increases in US interest rates are expected over the year ahead and
there is no longer an expectation of additional monetary easing in other major
economies. Financial markets have been functioning effectively.
Domestically, the transition to lower levels of mining investment following the mining
investment boom is almost complete. Business conditions have improved and capacity
utilisation has increased. Business investment has picked up in those parts of the
country not directly affected by the decline in mining investment. Year-ended GDP growth
is expected to have slowed in the March quarter, reflecting the quarter-to-quarter
variation in the growth figures. Looking forward, economic growth is still expected to
increase gradually over the next couple of years to a little above 3 per cent.
Indicators of the labour market remain mixed. Employment growth has been stronger over
recent months, although growth in total hours worked remains weak. The various
forward-looking indicators point to continued growth in employment over the period
ahead. Wage growth remains low and this is likely to continue for a while yet. Inflation
is expected to increase gradually as the economy strengthens. Slow growth in real wages
is restraining growth in household consumption.
The outlook continues to be supported by the low level of interest rates. The
depreciation of the exchange rate since 2013 has also assisted the economy in its
transition following the mining investment boom. An appreciating exchange rate would
complicate this adjustment.
Conditions in the housing market vary considerably around the country. Prices have been
rising briskly in some markets, although there are some signs that these conditions are
starting to ease. In other markets, prices are declining. In the eastern capital cities,
a considerable additional supply of apartments is scheduled to come on stream over the
next couple of years. Rent increases are the slowest for two decades. Growth in housing
debt has outpaced the slow growth in household incomes. The recent supervisory measures
should help address the risks associated with high and rising levels of indebtedness.
Lenders have also announced increases in mortgage rates, particularly those paid by
investors and on interest-only loans.
Taking account of the available information, the Board judged that holding the stance of
monetary policy unchanged at this meeting would be consistent with sustainable growth in
the economy and achieving the inflation target over time.
Media and Communications
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