No Change To Rates….for now

The Reserve Bank of Australia today released its Semi Annual Statement on Monetary Policy. Not surprisingly they have advised that under present economic conditions the Bank is comfortable in maintaining the current structure of short term interest rates.

They stated that in 1998, on present indications, growth is likely to be somewhat lower, and inflation higher, than the 1997 outcomes. The principal reason for this is that the international environment facing the Australian economy has become increasingly difficult over the past year or so. Decreasing demand from Asia for our goods and services and falling commodity prices has led to a decline in the exchange rate of the AUD and a widening in the current account deficit. However the RBA believes that this is being offset by sufficient domestic demand that will allow for overall growth and inflation to lie within satisfactory levels.

Their view that the local economy is sufficiently buoyant was backed by the release of unemployment figures showing the rate had dropped to an 8 year low of 7.9%. Therefore, unless the Asian crisis really starts to drag down our growth rate, expect rates to stay stable.