Statement by Glenn Stevens, Governor: Monetary Policy Decision - July 2010 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2010-07-06

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
6 July 2010
At its meeting today, the Board decided to leave the cash rate unchanged at 4.5 per
The global economy has continued to expand over recent months, consistent with a
trend pace of growth. The expansion remains uneven, with the major advanced
countries recording only modest growth overall, but growth in Asia and Latin
America, to date, very strong. There are indications that growth in China
is now starting to moderate to a more sustainable rate. In Europe, while
output in some key countries has been improving recently, prospects for next
year are more uncertain given the budgetary constraints governments face
and the pressure on euro area banks. US growth has looked stronger in the
first half of 2010 but the pace of labour market improvement is slow.
Caution in financial markets has been evident in the past couple of months, driven
principally by concerns about European sovereigns and banks but also by some
uncertainty about the pace of future global growth. Financial prices have
been more volatile and equity prices and government bond yields in major
countries have declined. Some tightness in funding markets is evident, though
not on the scale seen in late 2008. Commodity prices are off their peaks
but those most important for Australia remain at very high levels, and the
terms of trade are approaching their peak of two years ago.
With the high level of the terms of trade expected to add to incomes and demand,
output growth in Australia over the year ahead is likely to be about trend,
even though the effects of earlier expansionary policy measures will be diminishing.
Consumption spending is recording a modest increase at present, with households
displaying a degree of caution, but most indicators suggest business investment
will increase over the coming year. Business credit appears to have stabilised,
though credit conditions for some sectors remain difficult. Credit outstanding
for housing has continued to expand at a solid pace, but dwelling prices
are rising more slowly than earlier in the year.
The labour market has continued to firm gradually, and after the significant decline
last year, growth in wages has picked up a little, as had been expected.
Underlying inflation appears likely to be in the upper half of the target
zone over the next year. The rate of CPI increase is likely to be a little
above 3 per cent in the near term, due to the effects of increases in
tobacco taxes announced earlier in the year and significant increases in
prices for utilities.
The current setting of monetary policy is resulting in interest rates to borrowers
around their average levels of the past decade. Pending further information
about international and local conditions for demand and prices, the Board
views this setting of monetary policy as appropriate.
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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