(Australian Associated Press)
The Reserve Bank has again kept the official cash rate at a record low of 1.5 per cent, but Governor Philip Lowe has tempered his economic outlook.
The decision at the board’s first meeting of the year was widely expected by analysts amid mounting economic concern both home and abroad, and means the cash rate has not shifted in 30 months.
Mr Lowe downgraded his expectations of 3.5 per cent economic growth in both 2019 and 2020 to around 3 per cent this year – and by a little less the year after – mainly due to an expected drop in resources exports.
The RBA has repeatedly signalled the cash rate is not likely to change for some time, though economists are predicting a cut before the end of the year.
The Australian dollar kicked a little higher on the news, more than regaining the ground it lost due to disappointing retail figures earlier on Tuesday.
It was trading at 72.62 US cents at 1603 AEDT, having dropped to as low as 71.95 US cents before lunch.
In his statement, Mr Lowe pointed to weaker than expected GDP growth in the September quarter due to slow growth in household consumption and income, while also nominating falling house prices in Sydney and Melbourne as another driver of domestic uncertainty.
“The outlook for global growth remains reasonable, although downside risks have increased,” he said.
He said trade tensions were affecting global trade and some investment decisions, while a slowing Chinese economy also weighed on conditions.
The cash rate, which reflects what the central bank charges commercial banks on overnight loans and influences all other interest rates, was last cut in August 2016 and hasn’t been hiked since November 2010.
JP Morgan analyst Sally Auld said it was fair to say weak January data on house prices, business conditions, building approvals and retail sales had cast a shadow over the domestic outlook.
“To the extent (the figures) represent a continuation of recent trends, they may not bode well for growth in (the first quarter), nor the RBA’s ability to keep policy on hold this year,” she said.