‘They are going to overlook the slowdown in GDP as a temporary blip. We think they will remain on hold until they see any signs of a pick up in the labour market.’ – Tapas Strickland, National Australia Bank
As markets expected, the Reserve Bank of Australia kept interest rates and its policy unchanged at its meeting on Tuesday but expressed optimism over the economic outlook for Australia despite acknowledging an economic slowdown during the latest quarter. The RBA left rates at a record low of 1.50% for the 10th month. The Bank pointed to rebounding iron ore and coal prices, the country’s main exporting goods, improved mining investment and a house building boom. Following these optimistic comments, the Aussie hit its 10-day high of 0.7500 against the Greenback. Policymakers also said that the upcoming GDP figures would show growth was slower in the March quarter. Analysts suggested that the Bank would likely remain on hold until it sees a rebound in the labour market, as the RBA stated that the situation in the job market was ‘mixed’, with high underemployment and low hours worked offsetting employment growth. According to market forecasts, the Australian economy grew 0.2% in the first quarter, compared to the preceding quarter’s expansion of 1.1%.
