Statement by Philip Lowe, Governor: Monetary Policy Decision - March 2017 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2017-03-07

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
7 March 2017
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
Conditions in the global economy have continued to improve over recent months. Business
and consumer confidence have both picked up. Above-trend growth is expected in a number
of advanced economies, although uncertainties remain. In China, growth is being
supported by higher spending on infrastructure and property construction. This
composition of growth and the rapid increase in borrowing mean that the medium-term
risks to Chinese growth remain. The improvement in the global economy has contributed to
higher commodity prices, which are providing a significant boost to Australia's national
Headline inflation rates have moved higher in most countries, partly reflecting the
higher commodity prices. Long-term bond yields are higher than last year, although in a
historical context they remain low. Interest rates are expected to increase further in
the United States and there is no longer an expectation of additional monetary easing in
other major economies. Financial markets have been functioning effectively and stock
markets have mostly risen.
The Australian economy is continuing its transition following the end of the mining
investment boom, expanding by around 2½ per cent in 2016. Exports have risen strongly
and non-mining business investment has risen over the past year. Most measures of
business and consumer confidence are at, or above, average. Consumption growth was
stronger towards the end of the year, although growth in household income remains low.
The outlook continues to be supported by the low level of interest rates. Financial
institutions remain in a good position to lend. 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.
Labour market indicators continue to be mixed and there is considerable variation in
employment outcomes across the country. The unemployment rate has been steady at around
5¾ per cent over the past year, with employment growth concentrated in part-time jobs.
The forward-looking indicators point to continued expansion in employment over the
period ahead.
Inflation remains quite low. With growth in labour costs remaining subdued, underlying
inflation is likely to stay low for some time. Headline inflation is expected to pick up
over the course of 2017 to be above 2 per cent, with the rise in underlying inflation
expected to be a bit more gradual.
Conditions in the housing market vary considerably around the country. In some markets,
conditions are strong and prices are rising briskly. 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. Growth in rents is the
slowest for two decades. Borrowing for housing by investors has picked up over recent
months. Supervisory measures have contributed to some strengthening of lending
standards.
Taking account of the available information 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.
Media and Communications
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