MNI POLICY: RBA Leaves Rates On Hold, Prepared To Cut If Need

By Lachlan Colquhoun

     LONDON (MNI) - The Reserve Bank of Australia has left official rates

unchanged at a record low 0.75% but is prepared to cut rates again to support

full employment and help achieve its inflation target.

     The RBA had been expected to pause this month after cutting rates in June,

July and October, and after key labour force and inflation data recently gave

some support to its view that current policy settings were having a positive

impact.

     "After a soft patch in the second half of last year, a gentle turning point

appears to have been reached," the RBA said in today's statement.

     "The low level of interest rates, recent tax cuts, ongoing spending on

infrastructure, the upswing in housing prices in some markets and a brighter

outlook for the resources sector should all support growth."

     --GROWTH PICK-UP

     The RBA said it was expecting growth of 2.25% this year, increasing to 3%

by 2021.

     Unemployment, currently at 5.2%, was expected to fall to "a little below 5%

in 2021".

     The Bank has renewed its focus on full employment as a goal outcome, and

although it has declined to name a target it is understood to be just above

4.5%, or the level at which wages will start to increase and fuel inflation.

     Headline inflation data, released last week, showed inflation running at

1.7% against the RBA target range of between 2% and 3%.

     "The easing of monetary policy since June is supporting employment and

income growth in Australia and a return of inflation to the medium-term target

range," the RBA statement said.

     The bank went on to repeat its view that "an extended period" of low

interest rates would be required in Australia.

     The Bank was "prepared to easy monetary policy further if needed", the

statement said.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MMLRB$,M$A$$$,M$L$$$]