Australia’s central bank kept interest rates steady on Tuesday as fears linked to the outlook for the world economy eased a few notches through February. The cash rate target was held at 4.25% as expected by most economists. The cash rate was cut twice in the concluding months of 2011.
As concrete steps were taken to head off a full-blown sovereign debt crisis in Greece, and with China’s own decision to loosen its policy reins last month, economists said the Reserve Bank of Australia was able to sit tight. Interest rates in Australia remain high relative to other developed economies, giving the RBA plenty of ammunition should world economic growth nosedive, economists say.
Australia’s economy has also made a solid start to 2012 with the job market showing improvement as a record mining investment boom gathers momentum. Unemployment fell in January to 5.1%, while leading indicators of the job market suggest job creation has been solid in parts of the economy. Share prices have also strengthened globally in recent months as investors grow more confident that a European meltdown has been headed off.
Still, the RBA is conscious of the fact the Australian dollar is strong and posing a major challenge for key areas of the economy like manufactured exports, tourism and sectors like education services. Job losses have mounted in manufacturing over recent months with an increasing number of firms warning of the need to scale down export plants or relocate overseas.
EasyForexNews Research Team