Statement by Philip Lowe, Governor: Monetary Policy Decision - November 2016 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2016-11-01

Media Release
Statement by Philip Lowe, Governor:
Monetary Policy Decision
1 November 2016
At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.
The global economy is continuing to grow, at a lower than average pace. Labour market
conditions in the advanced economies have improved over the past year, but growth in
global industrial production and trade remains subdued. Economic conditions in China
have steadied recently, supported by growth in infrastructure and property construction,
although medium-term risks to growth remain. Inflation remains below most central banks'
Commodity prices have risen over recent months, following the very substantial declines
over the past few years. The higher commodity prices have supported a rise in Australia's
terms of trade, although they remain much lower than they have been in recent years.
Financial markets are functioning effectively. Funding costs for high-quality borrowers
remain low and, globally, monetary policy remains remarkably accommodative. Government
bond yields have risen, but are still low by historical standards.
In Australia, the economy is growing at a moderate rate. The large decline in mining
investment is being offset by growth in other areas, including residential construction,
public demand and exports. Household consumption has been growing at a reasonable pace,
but appears to have slowed a little recently. Measures of household and business
sentiment remain above average.
Labour market indicators continue to be somewhat mixed. The unemployment rate has
declined this year, although there is considerable variation in employment growth across
the country. Part-time employment has been growing strongly, but employment growth
overall has slowed. The forward-looking indicators point to continued expansion in
employment in the near term.
Inflation remains quite low. The September quarter inflation data were broadly as
expected, with underlying inflation continuing to run at around 1½ per cent. Subdued
growth in labour costs and very low cost pressures elsewhere in the world mean that
inflation is expected to remain low for some time.
Low interest rates have been supporting domestic demand and the lower exchange rate
since 2013 has been helping the traded sector. Financial institutions are in a position
to lend for worthwhile purposes. These factors are assisting the economy to make the
necessary adjustments, though an appreciating exchange rate could complicate this.
The Bank's forecasts for output growth and inflation are little changed from those
of three months ago. Over the next year, the economy is forecast to grow at close to its
potential rate, before gradually strengthening. Inflation is expected to pick up
gradually over the next two years.
In the housing market, supervisory measures have strengthened lending standards and some
lenders are taking a more cautious attitude to lending in certain segments. Turnover in
the housing market and growth in lending for housing have slowed over the past year. The
rate of increase in housing prices is also lower than it was a year ago, although prices
in some markets have been rising briskly over the past few months. Considerable supply
of apartments is scheduled to come on stream over the next couple of years, particularly
in the eastern capital cities. Growth in rents is the slowest for some decades.
Taking account of the available information, and having eased monetary policy at its May
and August meetings, the Board judged that holding the stance of policy unchanged at
this meeting would be consistent with sustainable growth in the economy and achieving
the inflation target over time.