Interest rates on hold

Investors have been spared another interest rate rise.

The Reserve Bank of Australia has announced the cash rate will remain unchanged, at least for now, at 4.75 per cent.

Governor Glenn Stevens says one of the reasons for keeping rates on hold is that asset prices, including house prices, have softened over recent months.

However, there are signs of more willingness to lend by the banks and national income levels are still growing.

“Investment in the resources sector is picking up strongly in response to high levels of commodity prices and the outlook remains very positive,” Stevens says.

“A number of service sectors are also expanding at a solid pace. In other areas, cautious behaviour by households and the high level of the exchange rate are having a noticeable dampening effect. The impetus from earlier Australian Government spending programs is now also abating, as had been intended.”

Stevens says a “gradual recovery” from the floods and cyclones over summer is taking place, but a resumption of coal production in flooded mines has slowed.

“Growth through 2011 is now unlikely to be as strong as earlier forecast,” Stevens says.

“Over the medium term, overall growth is still likely to be at trend or higher, if the world economy grows as expected.”

Article source: