Australian Property News

Interest rates remain unchanged

Posted on Wednesday, February 02 2011 at 1:30 PM

Investors have been spared from another interest rate rise, with the Reserve Bank of Australia (RBA) leaving the cash rate unchanged this week at 4.75 per cent.

RBA Governor Glenn Stevens says global output grew strongly in 2010 and Australia's terms of trade are at their highest level since the early 1950s, with national income growing strongly.

"There have been further indications that private investment is beginning to pick up in response to high levels of commodity prices," Stevens says.

"In the household sector thus far, in contrast, there continues to be caution in spending and borrowing, and an increase in the saving rate.  Asset values have generally been little changed over recent months and overall credit growth remains quite subdued."

The RBA says employment growth was unusually strong in 2010 and indicators suggest further growth, though most likely at a slower pace. However, the flooding in Queensland and Victoria is having a temporary adverse effect on economic activity and prices.

"Some production of crops and resources has been lost and some other forms of economic output have also been lower in the affected areas," Stevens says. 

"Resumption of production is occurring at differing speeds by region and industry. In setting monetary policy the Bank will, as on past occasions where natural disasters have occurred, look through the estimated effects of these short-term events on activity and prices. The focus of monetary policy will remain on medium-term prospects for economic activity and inflation."