Statement by Glenn Stevens, Governor: Monetary Policy Decision - March 2014 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2014-03-04

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
4 March 2014
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per
Growth in the global economy was a bit below trend in 2013, but there are reasonable
prospects of a pick-up this year. The United States economy, while affected
by adverse weather, continues its expansion and the euro area has begun a
recovery from recession, albeit a fragile one. Japan has recorded a significant
pick-up in growth, while China's growth remains in line with policymakers'
objectives. Commodity prices have declined from their peaks but in historical
terms remain high.
Financial conditions overall remain very accommodative. Long-term interest rates
and most risk spreads remain low. Equity and credit markets are well placed
to provide adequate funding, though for some emerging market countries conditions
are considerably more challenging than they were a year ago.
In Australia, recent information suggests slightly firmer consumer demand and foreshadows
a solid expansion in housing construction. Some indicators of business conditions
and confidence have shown improvement and exports are rising. At the same
time, resources sector investment spending is set to decline significantly
and, at this stage, signs of improvement in investment intentions in other
sectors are only tentative. Public spending is scheduled to be subdued.
The demand for labour has remained weak and, as a result, the rate of unemployment
has continued to edge higher. Growth in wages has declined noticeably. If
domestic costs remain contained, some moderation in the growth of prices
for non-traded goods could be expected over time, 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 savers continue
to look for higher returns in response to low rates on safe instruments.
Credit growth remains low overall but is picking up gradually for households.
Dwelling prices have increased significantly over the past year. The decline
in the exchange rate seen to date will assist in achieving balanced growth
in the economy, though the exchange rate remains high by historical standards.
Looking ahead, the Bank expects unemployment to rise further before it peaks. Over
time, growth is expected to strengthen, helped by continued low interest
rates and the lower exchange rate. 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.
Dr Christopher Kent
Assistant Governor (Economic)
Phone: +61 2 9551 8800
Dr Guy Debelle
Assistant Governor (Financial Markets)
Phone: +61 2 9551 8200
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