The Reserve Bank has kept the cash rate unchanged at 2.75%, saying rates are low enough to encourage growth. This ‘steady as she goes’ approach is welcomed by some in the retail auto industry.
From an auto sales perspective, the pace of borrowing in Australia remains relatively subdued though with some recent signs of increased demand for finance by households.
RBA governor Glenn Stevens says the inflation outlook provides some scope for further cuts.
“The board judged that the easier financial conditions now in place will contribute to a strengthening of growth over time,” he says.
“The May 7 cut of a quarter point surprised many market participants, though economists were correct in calling for no change today.”
Stevens says data available since the bank’s last meeting “is consistent with global growth running a bit below average this year, with reasonable prospects of a pick-up next year”.
The International Monetary Fund in April cut its 2013 forecast for global growth to 3.3% from an earlier prediction of 3.5% and lowered its 2014 forecast to 4% from 4.1%. Last week the IMF cut its forecast for China’s 2013 growth to 7.75% from 8%.
Official figures are expected to show Australia’s annual pace of economy growth slows to 2.7% in the first quarter from 3.1%, according to a Reuters survey of economists.
Australia’s growth in the past year has been “a bit below trend” with more of the same expected in the near term. Inflation is expected to remain consistent with the bank’s medium-term target over the next one to two years, says Stevens.
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