Statement by Glenn Stevens, Governor: Monetary Policy Decision - September 2014 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2014-09-02

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
2 September 2014
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per
Growth in the global economy is continuing at a moderate pace. China's growth
remains generally in line with policymakers' objectives, with weakening
property markets a challenge in the near term. Commodity prices in historical
terms remain high, but some of those important to Australia have declined
this year.
Financial conditions overall remain very accommodative. Long-term interest rates
and risk spreads remain very low. Volatility in many financial prices is
currently unusually low. Markets appear to be attaching a very low probability
to any rise in global interest rates or other adverse event over the period
In Australia, the most recent survey data indicate gradually improving business conditions
and some recovery in household sentiment after a weaker period around mid
year, suggesting moderate growth in the economy is occurring. Resources sector
investment spending is starting to decline significantly. Investment intentions
in some other sectors continue to improve, though these areas of capital
spending are expected to see only moderate growth in the near term. Public
spending is scheduled to be subdued. Overall, the Bank still expects growth
to be a little below trend over the year ahead.
The recorded rate of unemployment has increased recently, despite some improvement
in most other indicators for the labour market this year. The Bank's
assessment remains that the labour market has a degree of spare capacity
and that it will probably be some time yet before unemployment declines consistently.
Growth in wages has declined noticeably and is expected to remain relatively
modest over the period ahead, 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 have continued
to edge lower over recent months as competition to lend has increased. Investors
continue to look for higher returns in response to low rates on safe instruments.
Credit growth has picked up a little, including most recently to businesses.
The increase in dwelling prices continues. The exchange rate, on the other
hand, remains above most estimates of its fundamental value, particularly
given the declines in key commodity prices. It is offering less assistance
than would normally be expected in achieving balanced growth in the economy.
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.
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