The Reserve Bank of Australia kept its cash rate unchanged at 2 percent, as expected, and indicated it has become slightly less concerned about volatility in financial markets and the overheated housing market in Sydney and Melbourne. Governor Glenn Stevens released a statement that was almost a carbon copy of last month's monetary policy statement on Sept. 1, noting that the Australian dollar was adjusting to significant declines in key commodity prices and repeating that it would continue to monitor economic and financial conditions to ensure monetary policy was consistent with fostering sustainable growth and inflation in line with target. The Australian dollar has fallen about 13 percent against the US dollar this year, reaching the lowest level in more than six years last month and helping a soften the impact of weaker prices for iron ore and coal. The currency jumped to 71.13 US cents after today's statement from 70.80 cents immediately before. The kiwi fell to 91.26 Australian cents from 91.72 cents. "In Australia, the available information suggests that moderate expansion in the economy continues," Stevens said. "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." He said the economy is likely to be operating with a degree of spare capacity "for some time yet, with domestic inflationary pressures contained" and forecast to remain "consistent with the target over the next one to two years, even with a lower exchange rate." Stevens noted that equity market volatility had continued but added a new phrase to his statement, that "the functioning of financial markets generally has not, to date, been impaired." Last month he linked equity market volatility to developments in China, Australia's biggest market. The Shanghai Composite Index has been relatively stable since late August, having tumbled through that month. He did reiterate that there had been "further softening in conditions in China and east Asia of late, but stronger US growth." Another change in the latest statement was to include Melbourne along with Sydney in referring to strong growth in house prices. However he noted that regulatory measures "are helping to contain risks that may arise from the housing market" while last month he said the bank was "working with other regulators to assess and contain risks that may arise from the housing market." (BusinessDesk)
The governor of the Reserve Bank of Australia (RBA), Glenn Stevens, has indicated that the central bank has become less concerned over the state of the housing markets in Sydney and Melbourne, saying that he has faith in the regulatory measures being taken to control the markets. In a speech on Wednesday at Macquarie University, Stevens said there was no evidence yet for an increase in house prices but added that it would be “premature to say so”.