Statement by Glenn Stevens, Governor: Monetary Policy - June 2009 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2009-06-02

Media Release
Statement by Glenn Stevens, Governor: Monetary Policy
2 June 2009
At its meeting today, the Board decided to leave the cash rate unchanged at 3.0 per
Evidence has continued to emerge that the global economy is stabilising, after a
sharp contraction during the December and March quarters. The considerable
economic policy stimulus in train in most countries is helping to contain
the downturn, and should support an eventual recovery. The turnaround is
clearest in China and some other emerging countries. Recovery in the major
countries is likely to take longer to begin and be slower when it does occur.
Prospects are being helped by better conditions in global financial markets. Confidence,
while improving, nonetheless remains fragile and balance sheets are under
pressure from the effects of economic weakness on asset quality. Credit remains
tight. Continued progress in restoring balance sheets is essential for a
durable recovery.
The Australian economy has been contracting. Capacity utilisation has fallen back
to about average levels, and will decline further over the rest of the year.
With demand for labour weakening, growth in labour costs is beginning to
fall. These conditions are likely to see inflation continue to abate over
the next two years.
A pick-up in housing credit demand suggests stronger dwelling activity is likely
later in the year. Business borrowing, on the other hand, is declining, as
companies postpone investment plans and seek to reduce leverage, in an environment
of tighter lending standards.
Monetary policy has been eased significantly. Market and mortgage rates are at very
low levels by historical standards. Business loan rates are below average.
Much of the effect of this is yet to be observed. Fiscal measures are also
providing considerable support for demand.
Nonetheless, the prospect of inflation declining over the medium term suggests that
scope remains for some further easing of monetary policy, if needed. In assessing
how it might use that scope, the Board will continue to monitor how economic
and financial conditions unfold, and how they impinge on prospects for a
sustainable recovery in economic activity.
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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