Free Trial

(M2) Correction Extends


Late Session Rebound


(M2) Corrective Cycle Remains In Play

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access
Repeats Story Initially Transmitted at 04:10 GMT Oct 3/00:10 EST Oct 3
By Sophia Rodrigues
     SYDNEY (MNI) - The Reserve Bank of Australia left its official cash rate
unchanged and presented a slightly more upbeat statement while signaling
slightly reduced worries about the housing market.
     The statement suggests the next move in the cash rate is likely to be up
but the timing could be longer than market anticipated given the continued
concern on the exchange rate, high household debt and expectations that
inflation will pick up only gradually.
     As expected the cash rate was kept on hold at 1.5% for the thirteenth
meeting in a row.
     The RBA maintained the commentary on the exchange rate despite the very
recent bounce seen in the U.S. dollar. The higher Australian dollar is "weighing
on the outlook for output and employment. An appreciating exchange rate would be
expected to result in a slower pick-up in economic activity and inflation than
currently forecast," the RBA said.
     There were a few positive comments on the local economy which were in line
with recent comments by senior RBA officials, but none pointed to any
significant change in its growth or inflation outlook.
     In particular, the RBA said that over recent months there have have been
more consistent signs that non-mining business investment is picking up but
added that a "consolidation of this trend would be a welcome development."
     The RBA also pointed to the high level of business conditions. Despite this
and other recent positive data, it remained cautious, maintaining its outlook
that growth would "gradually pick up over the coming year."
     The RBA said employment continued to grow strongly, with increase in all
states and a rise in labor force participation but maintained that the jobless
rate is expected to decline only gradually over the next couple of year.
     The RBA also pointed to a rise in capacity utilization, which was a new
addition to the cash rate statement, and yet maintained its outlook that
inflation would "pick up gradually as the economy strengthens."
     The lack of any upgrade in the growth or inflation outlooks mainly stems
from the RBA's continued view that growth in real wages will remain slow and
high levels of household debt are likely to constrain growth in household
     The commentary on the housing market signaled the central bank's concerns
are easing, with the RBA noting that borrowing by investors has slowed a little
recently. The RBA also pointed to further signs that conditions are easing in
the Sydney housing market. 
     These comments suggest any further macro-prudential measures to slow the
housing market will not be needed and mortgage holders can take comfort that
their interest rates are unlikely to rise in the near future.
     The commentary on global growth and markets was largely unchanged, in line
with expectations.
--MNI Sydney Bureau; tel: +61 2-9716-5467; email:

To read the full story

Why Subscribe to

MNI is the leading provider

of news and intelligence specifically for the Global Foreign Exchange and Fixed Income Markets, providing timely, relevant, and critical insight for market professionals and those who want to make informed investment decisions. We offer not simply news, but news analysis, linking breaking news to the effects on capital markets. Our exclusive information and intelligence moves markets.

Our credibility

for delivering mission-critical information has been built over three decades. The quality and experience of MNI's team of analysts and reporters across America, Asia and Europe truly sets us apart. Our Markets team includes former fixed-income specialists, currency traders, economists and strategists, who are able to combine expertise on macro economics, financial markets, and political risk to give a comprehensive and holistic insight on global markets.