MNI REVIEW: RBA Leaves Rates On Hold, Will Ease If Needed

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of Australia has left rates unchanged

Tuesday, but stands ready to "easy monetary policy further" if needed to support

sustainable economic growth.

     The decision was widely expected after consecutive 25 bps cuts in June and

July pushed rates to a record low 1%, and the Bank will now monitor the impact

the economy, specifically the labour market.

     "A further gradual lift in wages would be a welcome development," Governor

Philip Lowe said in a statement accompanying today's decision.

     "It is reasonable to expect that an extended period of low interest rates

will be required in Australia to make progress in reducing unemployment and

achieve more assured progress towards the inflation target," he added.

     Already, the two cuts have been credited with arresting the slide in the

residential housing market, with private sector data this week showing a 0.8%

increase in house prices nationally, and a 1.6 increase in the key Sydney market

--  although the RBA warned in their statement of weaker activity in the new

dwellings sector.

     --SLOWER GROWTH

     The nascent recovery in the housing market has not been matched elsewhere

in the economy, however, with retail sales results also released today showing a

0.1% fall in July.

     GDP data for the second quarter is due for release Wednesday, and is

expected to show growth of 0.4% which would equate to annualized growth of 1.5%.

This is below RBA forecasts of over 2% growth throughout 2019, and is one reason

why the Bank's outlook remains dovish.

     The recent RBA Statement on Monetary Policy noted that market's had priced

in further cuts this year, and also said the Bank had reviewed "unconventional"

policy measures which may be needed if Monetary policy transmission is not

effective.

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

--MNI Sydney Bureau; +61 405322399; email: lachlan.colquhoun.ext@marketnews.com

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