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RBA leaves cash rate on hold at 2.5% in November 2014
Topic Started: 4 Nov 2014, 02:30 PM (1,159 Views)
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4 November 2014

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy is continuing at a moderate pace. China's growth has generally been in line with policymakers' objectives, though weakening property markets there present a challenge in the near term. Commodity prices in historical terms remain high, but some of those important to Australia have declined further in recent months.

Volatility in some financial markets has picked up over the past couple of months. Overall, however, financial conditions remain very accommodative. Long-term interest rates and risk spreads remain very low. Markets still appear to be attaching a low probability to any rise in global interest rates or other adverse event over the period ahead.

In Australia, most data are consistent with moderate growth in the economy. Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend for the next several quarters.

Recent data on prices confirmed that inflation is running between 2 and 3 per cent, as expected, and this is likely to continue. Although some forward indicators of employment have been firming this year, the labour market has a degree of spare capacity and it will probably be some time yet before unemployment declines consistently. Hence, growth in wages is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and have continued to edge lower over the past year or so as competition to lend has increased. Investors continue to look for higher returns in response to low rates on safe instruments. Credit growth is moderate overall, but with a further pick-up in recent months in lending to investors in housing assets. Dwelling prices have continued to rise.

The exchange rate has traded at lower levels recently, in large part reflecting the strengthening US dollar. But the Australian dollar remains above most estimates of its fundamental value, particularly given the further declines in key commodity prices in recent months. It is offering less assistance than would normally be expected in achieving balanced growth in the economy.

Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.
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The RBA needs to man up and really take control of policy – or more importantly start calling out the Government, Treasury and the Banks on this mess. Somebody has to start taking responsibility for their actions in the destruction of the economy and the future of its citizens. It is a big ask because you’d also have to call all the university professors for the dunder-heads they are. Everyone needs to go back and revisit the debate that occurred at the time of this stupid floating of the dollar and the total opening up of the capital account.

Former Head of Treasury, John Stone, warned of all the likely consequences and his opinions of the time have turned out to be spot on. That said it’s a damned site harder to untangle a mess than to cause the tangled mess in the first place.

One thing that I repeat somewhat boringly but allow me a bit of leeway because I’m one of the very few who was even alive let alone trying to run a (farming) business during the last inflationary debacle. It’s a fairy story that, in the face of all the inflation that will be caused by the devaluation, all the unions and the ‘rentiers’ such as lawyers, accountants, trades etc etc etc will just think “Oh! Our living standards are declining because of a fall in the dollar = for the good of the country I’ll go without!” That’s not in our thinking at all. Further “we’ll vote the bastards out that presided over the fall in the dollar and we’ll keep voting the bastards out until we get our rights!!!!! And don’t you forget it!”

Again Walt Kelly’s Pogo got it right! “I have seen the enemy and he is us”

The answers lie back in time. My despair dates back a long time. Being an Farmer and Economist has dreadful effects on one’s outlook!

Just adding to the difficulties here. We are currently working on a bit of an export business to China. The market we are selling (hmmm trying to sell) to is just monstrous and it can afford to pay prices for things that the average family in Australia or NZ just cannot pay. IMO the future is bleak and there is little can be done to alter that.
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Dexter
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4 Nov 2014, 03:02 PM


Just adding to the difficulties here. We are currently working on a bit of an export business to China. The market we are selling (hmmm trying to sell) to is just monstrous and it can afford to pay prices for things that the average family in Australia or NZ just cannot pay. IMO the future is bleak and there is little can be done to alter that.
Are you saying the average chinese family is wealthier than the average Australian family.
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Ex BP Golly
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Glenn Bernanke fails to make a decision again :wak:
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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bundy
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Is anyone surprised?
Edited by bundy, 4 Nov 2014, 06:49 PM.
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Timo
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What choice do they have? The RBA and corrupt Government hoping the other will trigger the badly needed crash.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
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herbie
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Timo
4 Nov 2014, 07:07 PM
What choice do they have?
None really.
Timo
4 Nov 2014, 07:07 PM
The RBA and corrupt Government hoping the other will trigger the badly needed crash.
With them both very keen on NOT triggering a crash - Albeit badly needed in your opinion.
Edited by herbie, 4 Nov 2014, 07:18 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Lef-tee
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They can't go on a rate hiking spree because the only thing we have to push the economy along - house price inflation - will stall if they do.
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Bardon
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Ex BP Golly
4 Nov 2014, 04:33 PM
Glenn Bernanke fails to make a decision again :wak:
Yes it was a pretty gutless and weak call, that they didn't lower them.
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