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--Lowe Speech Comes After RBA Cuts Rates To Record Low
--RBA Says Seeking Full Employment, Inflation At Target
By Lachlan Colquhoun
SYDNEY(MNI) - More action is needed from governments globally to help build
a platform for investment and a return to more normal rates of interest, Reserve
Bank of Australia Governor Philip Lowe said Tuesday, joining the chorus of
central bankers calling for increased fiscal policy.
Speaking in Melbourne after the RBA cut rates for a third time in five
months to a record low 0.75%, Lowe said that any return to rate normality needed
to address the factors which were hindering investment, mainly that "the global
appetite to save is high relative to the global appetite to invest".
"This is mainly a task for governments and businesses, not for central
banks," Lowe said.
"Whether or not this will happen, only time will tell, but as a central
bank in a small open economy we have to take the world as we find it," he said.
Lowe's comments echo those of outgoing European Central Bank president
Mario Draghi, who said the ECB was reaching the limits of what it could achieve
through its monetary policy and that it was time for government action.
Earlier Tuesday, the RBA cut its official cash rate by 25 bps to 0.75% and
said it stands ready to ease rates again "to support sustainable growth in the
Although there are signs of a "gentle turning point" in the domestic
economy, the RBA said, a combination of global downside risks and sluggish
domestic employment growth had swung its decision.
"The Board took the decision to lower interest rates further today to
support employment and income growth and to provide greater confidence that
inflation will be consistent with the medium-term target," the RBA statement
While noting the overall growth in employment over recent years, the
statement said the RBA was seeking "assured progress towards both full
employment and the inflation target" and the latest decision would help it make
progress on both fronts.
In his speech, Lowe said the cuts were made with the conviction that
"monetary policy still works," particularly to "support employment, jobs and
income growth across the economy," he said.
"Today's decision, together with our decisions in June and July, will
assist on each of these fronts."
The RBA discounted evidence that its two rate cuts were fuelling a new
bubble in the residential housing market, saying that although there was a
"turnaround" in the key markets of Sydney and Melbourne, dwelling activity was
weak and growth in housing credit was low.
Earlier Tuesday, the Australian Bureau of Statistics released data showing
that dwelling approvals fell 1.1% month on month in August.
The RBA statement noted that unemployment is at 5.4% and employment growth
was now likely to slow down, while wages growth remained subdued. At an
annualised 1.6%, inflation is well under the RBA's 2% to 3% target range, while
the economy is growing at a "weaker than expected" 1.4%.
--MNI London Bureau; tel: +44 203-586-2225; email: email@example.com