Interest Rates Unchanged

The Reserve Bank of Australia has left official interest rates unchanged for the seventh straight month. The current official interest rate in Australia is 2.50%.

The Reserve Bank commenting is suggesting that consumption and demand were picking up in the economy. Investment especially from non mining areas appears also to be picking up slightly.

Employment growth is still weak with the expectation that the unemployment rate will continue to increase in the short term before dropping. The Reserve Bank seems of the view that demand for employees will begin to show signs of increasing in the near term. As a corollary wages growth appears stalled with wage inflation almost negligible. Given this demand for good will be constrained a little and thus inflation will continue relately subdued in the short term.

Internationally, there appears to be some improvement in demand and production in the United States and China. However in line with expectations China’s demand has weakened a little, but commodity price are still above long term trends.

Given the above interest rates at least in the short to medium term will continue where they are currently placed, 2.50%. The Board of the Reserve Bank indicated that monetary policy is appropriate for the current economic environment. They felt that keeping interest rates at their current level for the immediate future was the best course of action.