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Economic update by Macquarie Private Wealth
4 June 2010
At its 1 June meeting, the Reserve Bank of Australia (RBA) announced that it will keep official cash rate steady at 4.5%.
In the accompanying statement, RBA Governor, Glenn Stevens, notes that since the previous meeting "concerns about sovereign creditworthiness in several European countries have been a focus of financial markets. Investors have generally displayed a good deal more caution. As a result, equity prices have fallen and long-term government bond rates have declined outside of the countries most affected by the sovereign concerns."
Glenn Stevens concluded "consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago. Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term".
It appears the interest rate rises are having a moderating effect on the domestic economy. The Australian Bureau of Statistics (ABS) issued the retail sales figures for April which rose 0.6% when compared to March and 0.9% on the prior April, slightly ahead of expectations. ABS building approvals fell back sharply in April, down 14.8% on March (though 21.3% ahead of April in the prior year) with private sector house approvals falling 13.5% on the prior month. All states across Australia recorded weak figures.
Official cash rate
Source: IRESS and MPW Research
