Statement by Glenn Stevens, Governor: Monetary Policy Decision - June 2015 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2015-06-02

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
2 June 2015
At its meeting today, the Board decided to leave the cash rate unchanged at
2.0 per cent
The global economy is expanding at a moderate pace, but some key commodity prices
are much lower than a year ago. This trend appears largely to reflect increased
supply, including from Australia. Australia's terms of trade are falling
nonetheless.
The Federal Reserve is expected to start increasing its policy rate later this year,
but some other major central banks are continuing to ease policy. Hence,
global financial conditions remain very accommodative. Despite some increases
in bond yields recently, long-term borrowing rates for sovereigns and creditworthy
private borrowers remain remarkably low.
In Australia, the available information suggests the economy has continued to grow,
but at a rate somewhat below its longer-term average. Household spending
has improved, including a large rise in dwelling construction, and exports
are rising. But a key drag on private demand is weakness in business capital
expenditure in both the mining and non-mining sectors and this is likely
to persist over the coming year. Public spending is also scheduled to be
subdued. Overall, the economy is likely to be operating with a degree of
spare capacity for some time yet. With very slow growth in labour costs,
inflation is forecast to remain consistent with the target over the next
one to two years, even with a lower exchange rate.
In such circumstances, monetary policy needs to be accommodative. Low interest rates
are acting to support borrowing and spending. Credit is recording moderate
growth overall, with stronger lending to businesses and growth in lending
to the housing market broadly steady over recent months. Dwelling prices
continue to rise strongly in Sydney, though trends have been more varied
in a number of other cities. The Bank is working with other regulators to
assess and contain risks that may arise from the housing market. In other
asset markets, prices for equities and commercial property have been supported
by lower long-term interest rates.
The Australian dollar has declined noticeably against a rising US dollar over the
past year, though less so against a basket of currencies. Further depreciation
seems both likely and necessary, particularly given the significant declines
in key commodity prices.
Having eased monetary policy last month, the Board today judged that leaving the
cash rate unchanged was appropriate at this meeting. Information on economic
and financial conditions to be received over the period ahead will inform
the Board's assessment of the outlook and hence whether the current stance
of policy will most effectively foster sustainable growth and inflation consistent
with the target.
Media Office
Information Department