Statement by Philip Lowe, Governor: Monetary Policy Decision - July 2017 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2017-07-04

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
4 July 2017
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The broad-based pick-up in the global economy is continuing. Labour markets have
tightened further in many countries and forecasts for global growth have been revised up
since last year. Above-trend growth is expected in a number of advanced economies,
although uncertainties remain. In China, growth is being supported by increased spending
on infrastructure and property construction, with the high level of debt continuing to
present a medium-term risk. The rise in commodity prices over the past year has boosted
Australia's national income.
Headline inflation rates, having moved higher over the past year, have declined recently
in response to lower oil prices. Wage growth remains subdued in most countries, as does
core inflation. Further increases in US interest rates are expected and there is no
longer an expectation of additional monetary easing in other major economies. Financial
markets have been functioning effectively and volatility has been low.
As expected, GDP growth slowed in the March quarter, partly reflecting temporary factors.
The Australian economy is expected to strengthen gradually, with the transition to lower
levels of mining investment following the mining investment boom almost complete.
Business conditions have improved and capacity utilisation has increased. Business
investment has picked up in those parts of the country not directly affected by the
decline in mining investment. At the same time, consumption growth remains subdued,
reflecting slow growth in real wages and high levels of household debt.
Indicators of the labour market remain mixed. Employment growth has been stronger over
recent months. The various forward-looking indicators point to continued growth in
employment over the period ahead. Wage growth remains low, however, and this is likely
to continue for a while yet. Inflation is expected to increase gradually as the economy
strengthens.
The outlook continues to be supported by the low level of interest rates. 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.
Conditions in the housing market vary considerably around the country. Housing prices
have been rising briskly in some markets, although there are some signs that these
conditions are starting to ease. In some 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. Rent increases are the slowest for two
decades. Growth in housing debt has outpaced the slow growth in household incomes. The
recent supervisory measures should help address the risks associated with high and
rising levels of household indebtedness. Lenders have also announced increases in
mortgage rates for investor and interest-only loans.
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.