Statement by Glenn Stevens, Governor: Monetary Policy Decision - September 2011 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2011-09-06

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
6 September 2011
At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per
Conditions in global financial markets have been very unsettled over recent weeks,
as participants have confronted uncertainty about both the resolution of
sovereign debt problems and the prospects for economic growth in Europe and
the United States. As a result, the outlook for the global economy is less
clear than it was earlier in the year. Some temporary impediments that had
contributed to a slowing in growth in some countries over recent months,
such as the supply-chain disruptions from the Japanese earthquake and the
dampening effects of rising commodity prices, are lessening. But the uncertainty
and financial volatility is reducing confidence and may result in more cautious
behaviour by firms and households in major countries. A number of forecasters
have scaled back their global growth estimates over the past couple of months.
At this stage, little evidence is available to gauge any effects of the European
and US problems on other regions. Prices for key Australian commodities have
remained very high thus far, with growth in China continuing to look solid.
As a result, Australia's terms of trade are now at very high levels and
national income has been growing strongly. Investment in the resources sector
is picking up very strongly and some related service sectors are enjoying
better than average conditions. In other sectors, cautious behaviour by households
and the high level of the exchange rate are having a noticeable dampening
effect. The impetus from earlier Australian Government spending programs
is now also abating, as had been intended. Overall, the near-term growth
outlook continues to look somewhat weaker than was expected a few months
ago. Beyond the near term, growth is still likely to be at trend or higher,
unless the world economic outlook continues to deteriorate.
Growth in employment has been moderate this year and the unemployment rate has been
little changed, near 5 per cent, for some time now. Reports of skills
shortages remain confined to the resources and related sectors. After the
significant decline in 2009, growth in wages has returned to rates seen prior
to the downturn, though productivity growth has been weak.
Year-ended CPI inflation should start to decline towards the end of the year, as
temporary weather-related effects reverse. But measures of underlying inflation
have been increasing this year, after declining for the previous two years.
While they have, to date, remained consistent with the 2–3 per cent
target on a year-ended basis, the Board remains concerned about the medium-term
outlook for inflation. A key question will be the extent to which softer
global and domestic growth will work, in due course, to contain inflation.
Most financial indicators suggest that monetary policy has been exerting a degree
of restraint. Credit growth has declined over recent months and is very subdued
by historical standards, even with evidence of greater willingness to lend.
Most asset prices, including housing prices, have also softened. The exchange
rate is high. Each of these variables is affected by other factors as well,
but together they point to financial conditions being tighter than normal.
At today's meeting, the Board judged that it was prudent to maintain the current
stance of monetary policy. In future meetings, the Board will continue to
assess carefully the evolving outlook for growth and inflation.
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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