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RBA Governor Leaves Door Open To Cut Interest Rates Further
The Governor of the Reserve Bank of Australia Glen Stephens gave himself the option to cut interest rates further whilst making a speech on the relevance of monetary policy on investor and consumer confidence.
During a speech to the Canadian Chamber of Commerce Governor Stevens posed the question “Do the changes still matter for confidence? I think they do to some extent and that is a factor to keep in mind for the month-to-month tactical decisions,”
Earlier this month the central bank left official interest rates untouched at 3 per cent after having aggressively cut interest rates by 425 basis points to half century lows. During his speech Governor Stevens also said that both countries, Canada and Australia had clearly slipped into recession. Both countries have a high dependency on primary industries such as the export of raw materials.
Governor Stevens went on to add “there are good grounds to think that both countries should be in a relatively good position and well placed to take part in a renewed international expansion. It is too soon to say this is beginning yet, though developments over recent months are certainly consistent with the view that a recovery will get under way towards the end of the year. That said, most observers think that the early part of any new global expansion will be characterised by pretty slow growth.”
The central bank’s comments were in line with the RBA’s previous quarterly statement which forecast average growth of 0.5 per cent in the Australian economy during the next fiscal year which would then increase to 2.25 per cent in the year beyond next fiscal.
Governor Stevens when responding to questions said the forecasts were not sanguine and that the RBA had adopted a cautious approach when making its forecast.
“It is quite feasible to expect above average growth for a number of years at some point during an economic upswing. Exactly when that is and by how much no one really knows, but I don’t think it is crazily optimistic.” Mr. Stevens said.
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