Statement by Philip Lowe, Governor: Monetary Policy Decision - November 2019 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2019-11-05

Media Release
Statement by Philip Lowe, Governor: Monetary Policy Decision
5 November 2019
At its meeting today, the Board decided to leave the cash rate unchanged at 0.75 per cent.
While the outlook for the global economy remains reasonable, the risks are tilted to the downside. The
US–China trade and technology disputes continue to affect international trade flows and
investment as businesses scale back spending plans because of the uncertainty. At the same time, in most
advanced economies, unemployment rates are low and wages growth has picked up, although inflation
remains low. In China, the authorities have taken steps to support the economy while continuing to
address risks in the financial system.
Interest rates are very low around the world and a number of central banks have eased monetary policy
in response to the persistent downside risks and subdued inflation. Expectations of further monetary
easing have generally been scaled back over the past month and financial market sentiment has improved a
little. Even so, long-term government bond yields are around record lows in many countries, including
Australia. Borrowing rates for both businesses and households are also at historically low levels. The
Australian dollar is at the lower end of its range over recent times.
The outlook for the Australian economy is little changed from three months ago. After a soft patch in
the second half of last year, a gentle turning point appears to have been reached. The central scenario
is for the Australian economy to grow by around 2¼ per cent this year and then for growth
gradually to pick up to around 3 per cent in 2021. The low level of interest rates, recent tax
cuts, ongoing spending on infrastructure, the upswing in housing prices in some markets and a brighter
outlook for the resources sector should all support growth. The main domestic uncertainty continues to
be the outlook for consumption, with the sustained period of only modest increases in household
disposable income continuing to weigh on consumer spending. Other sources of uncertainty include the
effects of the drought and the evolution of the housing construction cycle.
Employment has continued to grow strongly and has been matched by strong growth in labour supply, with
labour force participation at a record high. The unemployment rate has remained steady at around
5¼ per cent over recent months. It is expected to remain around this level for some time,
before gradually declining to a little below 5 per cent in 2021. Wages growth remains subdued
and is expected to remain at around its current rate for some time yet. A further gradual lift in wages
growth would be a welcome development and is needed for inflation to be sustainably within the
2–3 per cent target range. Taken together, recent outcomes suggest that the Australian
economy can sustain lower rates of unemployment and underemployment.
The recent inflation data were broadly as expected, with headline inflation at 1.7 per cent
over the year to the September quarter. The central scenario remains for inflation to pick up, but to do
so only gradually. In both headline and underlying terms, inflation is expected to be close to
2 per cent in 2020 and 2021.
There are further signs of a turnaround in established housing markets, especially in Sydney and
Melbourne. In contrast, new dwelling activity is still declining and growth in housing credit remains
low. Demand for credit by investors is subdued and credit conditions, especially for small and
medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition
for borrowers of high credit quality.
The easing of monetary policy since June is supporting employment and income growth in Australia and a
return of inflation to the medium-term target range. Given global developments and the evidence of the
spare capacity in the Australian economy, it is reasonable to expect that an extended period of low
interest rates will be required in Australia to reach full employment and achieve the inflation target.
The Board will continue to monitor developments, including in the labour market, and is prepared to ease
monetary policy further if needed to support sustainable growth in the economy, full employment and the
achievement of the inflation target over time.
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