Statement by Philip Lowe, Governor: Monetary Policy Decision - April 2019 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2019-04-02

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
2 April 2019
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The outlook for the global economy remains reasonable, although growth has slowed and
downside risks have increased. Growth in international trade has declined and investment
intentions have softened in a number of countries. In China, the authorities have taken
steps to ease financing conditions, partly in response to slower growth in the economy.
Globally, headline inflation rates have moved lower following the earlier decline in oil
prices, although core inflation has picked up in a number of economies. In most advanced
economies, unemployment rates are low and wages growth has picked up.
Global financial conditions remain accommodative and have eased recently. Long-term bond
yields have declined further, consistent with the subdued outlook for inflation and
lower expectations for future policy rates in a number of advanced economies. Across a
range of markets, risk premiums remain low. Equity markets have also risen and are being
supported by growth in corporate earnings. In Australia, long-term bond yields have
fallen to historically low levels and short-term bank funding costs have moderated
further. The Australian dollar has remained within its narrow range of recent times.
While the terms of trade have increased over the past couple of years, they are expected
to decline over time.
The Australian labour market remains strong. There has been a significant increase in
employment and the unemployment rate is at 4.9 per cent. The vacancy rate remains high
and there are reports of skills shortages in some areas. The stronger labour market has
led to some pick-up in wages growth, which is a welcome development. Continued
improvement in the labour market is expected to see some further lift in wages growth
over time, although this is still expected to be a gradual process.
The GDP data paint a softer picture of the economy than do the labour market data. GDP
rose by just 0.2 per cent in the December quarter to be 2.3 per cent higher over 2018.
Growth in household consumption is being affected by the protracted period of weakness
in real household disposable income and the adjustment in housing markets. The drought
in parts of the country has also affected farm output. Offsetting these factors, higher
levels of spending on public infrastructure and an upswing in private investment are
supporting the growth outlook, as is the steady growth in employment.
The adjustment in established housing markets is continuing, after the earlier large
run-up in prices in some cities. Conditions remain soft and rent inflation remains low.
Credit conditions for some borrowers have tightened a little further over the past year
or so. At the same time, the demand for credit by investors in the housing market has
slowed noticeably as the dynamics of the housing market have changed. Growth in credit
extended to owner-occupiers has eased. Mortgage rates remain low and there is strong
competition for borrowers of high credit quality.
Inflation remains low and stable. Underlying inflation is expected to pick up gradually
over the next couple of years, although this has been taking a little longer than
earlier expected. The central scenario is for underlying inflation to be 2 per cent this
year and 2¼ per cent in 2020. In the near term, headline inflation is expected to
decline because of lower petrol prices earlier in the year, while underlying inflation
is expected to remain broadly stable.
The low level of interest rates is continuing to support the Australian economy. Further
progress in reducing unemployment and having inflation return to target is expected,
although this progress is likely to be gradual. Taking account of the available
information, the Board judged that it was appropriate to hold the stance of policy
unchanged at this meeting. The Board will continue to monitor developments and set
monetary policy to support sustainable growth in the economy and achieve the inflation
target over time.
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