News headline story
By James Glynn
SYDNEY–Australia’s central bank left interest rates unchanged at its monthly policy meeting Tuesday, waiting to see whether the falling Australian dollar and a change of Prime Minister can do the heavy lifting in reviving the nation’s economy.
The Reserve Bank of Australia left its cash rate target at a record low 2.0%, where it has remained since May. That matched the expectation of economists surveyed by The Wall Street Journal.
Still, financial markets are betting RBA Governor Glenn Stevens will announce a further two cuts over the next year as data point to an economy that is battling headwinds such as falling business investment and weak consumer confidence.
“In Australia, the available information suggests that moderate expansion in the economy continues,” Mr. Stevens said in a statement. “While growth has been somewhat below longer-term averages for some time, it has been accompanied with somewhat stronger growth of employment and a steady rate of unemployment over the past year.”
The RBA’s board met to set interest rates for first time since Malcolm Turnbull replaced Tony Abbott as Liberal Party leader and prime minister last month.
Many economists viewed the leadership change as reducing the risk of Australia tumbling into recession for the first time in a quarter of a century. Mr. Turnbull, a former investment banker, has already held a summit to canvass ideas from businesses, unions and the broader community about ways to reinvigorate the economy. In particular, some experts believe the prime minister is more likely to approve higher spending on infrastructure than Mr. Abbott.
Australia posted its slowest quarterly growth in four years in the second quarter, as a fading resources-investment boom and falling export revenue continued to put a brake on the economy.
The resource-rich country’s gross domestic product climbed by 0.2% from the first quarter and rose by 2% from a year earlier, the weakest quarterly performance since March 2011, when heavy floods along Australia’s east coast caused the economy to shrink by 0.4%.
The economy is feeling some benefit of a lower Australian dollar, which has fallen by around 25% in the past year. However, it has also been hit hard by falling commodity prices and a slowdown in China, the country’s largest trading partner.
Interest rates were cut twice in the first half of the year as prices for iron ore and coal–Australia’s two largest exports by value–weakened.
-Write to James Glynn at james.glynn@wsj.com
(END) Dow Jones Newswires
October 05, 2015 23:34 ET (03:34 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
20151005_DN_12162
