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RBA took wait-and-see attitude

The RBA decided to remain monetary policy unchanged at its meeting on Tuesday. The bank said in a covering statement that further cut of interest rate is open because of a long term of low inflation.

 

Current 2% interest rate has been preserving since May. The RBA has already twice cut interest rates this year on the background of raw materials fall, slow economy and low inflation rate.

 

Australia, which has gone 24 years without any severe problem, grew at its slowest pace in the second quarter this year. Despite the immediate actions of the bank, business and consumer confidence has lowered, and there are few signs non-mining sectors of the economy are taking up the slack from wilting investment in the resources industry. 

 

China is Australia's main trade partner, buying roughly a quarter of its exports. Current China’s economic problems have negative impact on iron ore – main Australia’s exports.

 

Now the RBA keeps a very careful position as risk of economic shock is very high. Governors are confident that further rate cut may improve inflation.

 

From the other side, interest rate is at its minimum. Such situation does not restrain economy.

 

The RBA keeps an eye now on raw materials, especially iron ore, and ready to act in case if economic recession has a more negative impact on Australia.