Statement by Philip Lowe, Governor: Monetary Policy Decision - April 2017 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2017-04-04

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
4 April 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 improved over recent months. Both global trade and
industrial production have picked up. Labour markets have tightened in many countries.
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 income.
Headline inflation rates have moved higher in most countries, partly reflecting the
higher commodity prices. Core inflation remains low. Long-term bond yields are higher
than last year, although in a historical context they remain low. Interest rates have
increased 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.
The Australian economy is continuing its transition following the end of the mining
investment boom. Recent data are consistent with ongoing moderate growth. Most measures
of business confidence are at, or above, average and non-mining business investment has
risen over the past year. At the same time, some indicators of conditions in the labour
market have softened recently. In particular, the unemployment rate has moved a little
higher and employment growth is modest. The various forward-looking indicators still
point to continued growth in employment over the period ahead. Wage growth remains slow.
The outlook continues to be supported by the low level of interest rates. Lenders have
recently announced increases in mortgage rates, particularly those paid by investors.
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.
Inflation remains quite low. Headline inflation is expected to pick up over the course
of 2017 to be above 2 per cent. The rise in underlying inflation is expected to be a bit
more gradual with growth in labour costs remaining subdued.
Conditions in the housing market continue to 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.
Growth in household borrowing, largely to purchase housing, continues to outpace growth
in household income. By reinforcing strong lending standards, the recently announced
supervisory measures should help address the risks associated with high and rising
levels of indebtedness. Lenders need to ensure that the serviceability metrics that they
use are appropriate for current conditions. A reduced reliance on interest-only housing
loans in the Australian market would also be a positive development.
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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