Statement by Glenn Stevens, Governor: Monetary Policy - August 2009 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2009-08-04

Media Release
Statement by Glenn Stevens, Governor: Monetary Policy
4 August 2009
At its meeting today, the Board decided to leave the cash rate unchanged at 3.0 per
With considerable economic stimulus in train around the world, the global economy
is stabilising after an earlier sharp contraction in demand. Downside risks
to the global outlook have diminished, though they have not disappeared and
most observers expect only modest growth overall. There is tentative evidence
that the US economy is approaching a turning point, but conditions in Europe
are still weakening. Growth in China, in contrast, has been very strong in
recent months, which is having an impact on other economies in the region
and on commodity markets.
Sentiment in global financial markets has continued to improve. Nonetheless, credit
conditions remain difficult, and the effects of economic weakness on asset
quality present a challenge. For the global economic recovery to be durable,
continued progress in restoring balance sheets is essential.
Economic conditions in Australia have been stronger than expected a few months ago,
with both consumer spending and exports notable for their resilience. Measures
of confidence have recovered a good deal of ground. This suggests that the
risk of a severe contraction in the Australian economy has abated. The most
likely outcome in the near term is a period of sluggish output, with consumer
spending likely to slow somewhat and investment remaining weak. Stronger
dwelling activity and public spending will start to provide more support
to overall demand soon, and growth is likely to firm into 2010.
Inflation is gradually moderating, given the earlier decline in energy and commodity
prices, and the effects of weaker demand on prices and labour costs. Given
the current prospects for demand and output, this moderation should continue
over the year ahead. The higher exchange rate over recent months will assist
this moderation, at the margin.
Housing credit has been solid, and dwelling prices have risen over recent months.
Business borrowing, on the other hand, has been declining, as companies have
postponed investment plans and sought to reduce leverage in an environment
of tighter lending standards. Large firms have had good access to equity
capital, and access to debt markets appears to be improving.
The Board's judgment is that the present accommodative setting of monetary
policy is appropriate given the economy's circumstances. The Board
will continue to monitor how economic and financial conditions unfold and
how they impinge on prospects for sustainable growth in economic activity
and achieving the inflation target.
Dr Philip Lowe
Assistant Governor (Economic)
Phone: +61 2 9551 8800
Dr Guy Debelle
Assistant Governor (Financial Markets)
Phone: +61 2 9551 8200
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