SYDNEY, Dec 3 — Australia’s central bank today held interest rates at a record low, despite “uncertainty” over consumer spending ahead of the festive season.
Reserve Bank of Australia chief Philip Lowe said the cash rate would remain unchanged at 0.75 per cent as downside risks in the global economy “lessened recently”.
The resource-rich economy recorded its weakest annual growth in a decade for the year to June, expanding just 1.4 per cent, but Lowe said the economy has reached a “gentle turning point”. He saw growth picking up to three per cent by 2021.
“The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices and a brighter outlook for the resources sector should all support growth,” Lowe said in a statement.
Australia has been struggling with low wage growth, which Lowe said would remain subdued for “some time”.
“The main domestic uncertainty continues to be the outlook for consumption, with the sustained period of only modest increases in household disposable income continuing to weigh on consumer spending,” he said.
The impact is likely to be felt in the retail sector, which over the past decade has seen a weakening during the traditional busy period over Christmas.
Lowe said an “extended period” of low rates is expected to meet employment and inflation targets and the bank is “prepared to ease monetary policy further” to support growth.
Analysts expect a further rate cut early in the New Year. — AFP