Australian Property News

Investors avoid another interest rate rise

Posted on Tuesday, March 01 2011 at 4:49 PM

Investors and homeowners have been spared an interest rate rise today, with official interest rates on hold for another month.

The Reserve Bank of Australia (RBA) left the cash rate of 4.75 per cent unchanged at its monthly meeting.

RBA Governor Glenn Stevens says the global economy is continuing its expansion, led by very strong growth in the Asian region. He says Australia's terms of trade are at their highest level since the early 1950s and national income is growing strongly.

"Private investment is picking up, mainly in the resources sector, 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 a higher rate of saving out of current income. The effects of the natural disasters over the summer have reduced output, but production levels should recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way."

The RBA says the nation's inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008.

"These moderate outcomes are being assisted by the high level of the exchange rate, the earlier decline in wages growth and strong competition in some key markets, which have worked to offset large rises in utilities prices," Stevens says.

"Production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year. Overall, looking through these temporary effects, the RBA expects that inflation over the year ahead will continue to be consistent with the two to three per cent target."