Statement by Glenn Stevens, Governor: Monetary Policy Decision - August 2016 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2016-08-02

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
2 August 2016
At its meeting today, the Board decided to lower the cash rate by 25 basis points to
1.50 per cent,
3 August 2016.
The global economy is continuing to grow, at a lower than average pace. Several advanced economies have recorded
improved conditions over the past year, but conditions have become more difficult for a number of emerging market
economies. Actions by Chinese policymakers are supporting the near-term growth outlook, but the underlying pace of
China's growth appears to be moderating.
Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years.
Australia's terms of trade remain much lower than they had been in recent years.
Financial markets have continued to function effectively. Funding costs for high-quality borrowers remain low and,
globally, monetary policy remains remarkably accommodative.
In Australia, recent data suggest that overall growth is continuing at a moderate pace, despite a very large decline
in business investment. Other areas of domestic demand, as well as exports, have been expanding at a pace at or
above trend. Labour market indicators continue to be somewhat mixed, but are consistent with a modest pace of
expansion in employment in the near term.
Recent data confirm that inflation remains quite low. Given very subdued growth in labour costs and very low cost
pressures elsewhere in the world, this is expected to remain the case for some time.
Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded
sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are all assisting
the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.
Supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are
also taking a more cautious attitude to lending in certain segments. The most recent information suggests that
dwelling prices have been rising only moderately over the course of this year, with considerable supply of
apartments scheduled to come on stream over the next couple of years, particularly in the eastern capital cities.
Growth in lending for housing purposes has slowed a little this year. All this suggests that the likelihood of lower
interest rates exacerbating risks in the housing market has diminished.
Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy,
with inflation returning to target over time, would be improved by easing monetary policy at this meeting.