Statement by Glenn Stevens, Governor: Monetary Policy Decision - April 2014 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2014-04-01

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
1 April 2014
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per
Growth in the global economy was a bit below trend in 2013, but there are reasonable
prospects of a pick-up this year. The United States economy, while affected
by adverse weather, continues its expansion and the euro area has begun a
recovery from recession, albeit a fragile one. Japan has recorded a significant
pick-up in growth. China's growth remains generally in line with policymakers'
objectives, though it may have slowed a little in early 2014. Commodity prices
have declined from their peaks but in historical terms remain high.
Financial conditions overall remain very accommodative. Long-term interest rates
and most risk spreads remain low. Equity and credit markets are well placed
to provide adequate funding, though for some emerging market countries conditions
are considerably more challenging than they were a year ago.
In Australia, the economy grew at a below trend pace in 2013. Recent information
suggests slightly firmer consumer demand over the summer and foreshadows
a solid expansion in housing construction. Some indicators of business conditions
and confidence have improved from a year ago and exports are rising. But
at the same time, resources sector investment spending is set to decline
significantly and, at this stage, signs of improvement in investment intentions
in other sectors are only tentative, as firms wait for more evidence of improved
conditions before committing to expansion plans. Public spending is scheduled
to be subdued.
The demand for labour has remained weak and, as a result, the rate of unemployment
has continued to edge higher. It will probably rise a little further in the
near term. Growth in wages has declined noticeably. If domestic costs remain
contained, some moderation in the growth of prices for non-traded goods could
be expected over time, which should keep inflation consistent with the target,
even with lower levels of the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and savers continue
to look for higher returns in response to low rates on safe instruments.
Credit growth is slowly picking up. Dwelling prices have increased significantly
over the past year. The decline in the exchange rate from its highs a year
ago will assist in achieving balanced growth in the economy, but less so
than previously as a result of the rise over the past few months. The exchange
rate remains high by historical standards.
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
Media Office
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