Australia Keeps Record Low Rate On Hold

Australia's central bank decided to leave its key interest rate unchanged at a record low amid improving outlook for non-mining investment and signs of easing in housing market conditions.

The board of the Reserve Bank of Australia, governed by Philip Lowe, maintained the cash rate at 1.50 percent. The outcome of the meeting came in line with expectations.

The interest rate has been at this level since September 2016. The bank had reduced the rate by 25-basis points each in August and May last year.

The bank noted that the low level of interest rates is continuing to support the Australian economy.

"The Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," the bank said in a statement.

The recent data have been consistent with the RBA's expectation that growth in the Australian economy will gradually pick up over the coming year.

The decline in mining investment will soon run its course. The outlook for non-mining investment has improved recently and reported business conditions are at a high level.

On property market, RBA said housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney.

Despite measures taken to address the risks associated with rising household indebtedness, growth in housing debt outpace the slow growth in household incomes.

The bank expects the jobless rate to decline a little over the next couple of years and wage growth to remain low for a while yet.

An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast, the bank added.

The Australian Bureau of Statistics is set to release GDP data on September 6. The quarterly growth is expected to accelerate to 0.8 percent in the second quarter from 0.3 percent in the first quarter.

Bill Evans, an economist at Westpac said GDP data is set to support RBA's optimistic assessment about the growth outlook.

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