Not a Media Release from the RBA - 6 March 2012

The following is not the media release from the RBA on Tuesday, after is regular meeting of the Board.

Not A Media Release

Number	2012-XXX
Date	6 March 2012
Embargo	For Immediate Release

Not A Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 4.25 per cent.

Information becoming available since the February meeting suggests the slowing in global economic conditions may be abating.  European economic conditions remain weak, although downside risks for future growth have lessened somewhat.  Recent data from the United States suggest a continuing expansion, although there remains considerable spare capacity, especially in the labour market. Growth in China has moderated as was intended, but early indicators for 2012 are consistent with on-going robust rates of growth. Conditions around other parts of Asia confirm less rapid growth, although risks of a troublesome slowdown are low.

Commodity prices, in SDR terms, have stabilised in the past month following moderate falls late in 2011.  Reflecting the high level for the Australian dollar, commodity prices received by many Australian producers have fallen since the middle of 2011.

Financial pressures have continued to ease in the past month with credit markets and previously problematic sovereign bond markets continuing to recover.  Much remains to be done to put European sovereigns and banks on a sound footing, but progress continues to be made.  Share markets have risen and term funding markets have are continuing to improve, including for Australian banks, albeit at increased cost compared with the situation prevailing in mid 2011.

Information on the Australian economy continues to suggest growth close to trend, with differences between sectors.  The outlook for business investment remains particularly robust and will act to counter sub-trend growth in consumer demand and housing construction.  Labour market conditions are less tight than experienced in the first half of 2011, although the unemployment rate remains a little above 5 per cent.  Growth in labour costs remain well contained, although there are substantial differences in wages growth between sectors.

Over the coming one to two years, and abstracting from the effects of the carbon price, the Bank expects inflation to be in the 2–3 per cent range.  Credit growth remains modest, driven by declines in personal credit. Housing prices continue to fall, although the rate of decline is slowing.  The falls in house prices are not yet a problem for bank balance sheets or the household sector.  The exchange rate remains strong, even though the terms of trade have started to decline. This is largely a reflection of a decline in the euro against all currencies. Nonetheless, the Australian dollar in trade-weighted terms remains higher than the Bank had previously assumed.

At today's meeting, the Board noted that interest rates for borrowers  increased during February, but not by an amount that is likely to have a material impact on borrowing or cash flows.  The Board will continue to take account of these trends when assessing the overall stance for monetary policy.   With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy was appropriate for the moment. Should demand conditions soften, the inflation outlook would provide considerable scope for easier monetary policy. The Board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation.