MNI REVIEW: RBA Leaves Rates Unchanged, To Ease If Needed

--RBA: Bushfires, Coronavirus Temporary Weights On Econ

By Lachlan Colquhoun

     SYDNEY (MNI) - The Reserve Bank of Australia left the official cash rate

unchanged at the record low 0.75% Tuesday, but, if needed, will ease further to

hit its employment and inflation targets.

     The recent bushfires and the coronavirus outbreak have introduced

uncertainty into the economy and while the Bank acknowledged these factors it

said they would only "temporarily weigh" on domestic growth.

     The RBA's decision was largely expected, given its view that the 3 cuts

over 2019 are still being transmitted through to the economy. The Bank cited

"long and variable lags" in transmission and the fact that rates had already

been reduced to a "very low level".

     The RBA maintained its outlook that the Australian economy would growth by

around 2.75% this year and 3% next year, although accepted that progress towards

both the inflation target of between 2% and 3% and full employment would be

gradual.

     Easier monetary policy had supported employment and income growth, put

downward pressure on the exchange rate and boosted asset prices, notably in the

residential housing sector, the RBA noted.

     Consumption growth was expected to "pick up gradually."

     "The overall outlook is also being supported by the low level of interest

rates, recent tax refunds, ongoing spending on infrastructure, a brighter

outlook for the resources sector and, later this year, an expected recovery in

residential construction," the RBA statement said.

     More will be known about the RBA's 2020 outlook when it releases its next

Statement on Monetary Policy on Feb. 7, and when the minutes of this meeting are

published on Feb. 18.

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

[TOPICS: M$A$$$,M$L$$$,MT$$$$,MX$$$$]