SYDNEY: Australia’s central bank chief fuelled speculation on yesterday it would lower rates again as he said previous easing measures were having an effect but there was ‘no serious impediment’ to another cut.
The Australian dollar slipped to 91.18 US cents from 91.61 US cents after Reserve Bank of Australia (RBA) governor Glenn Stevens said recent inflation data had underscored the case for further cuts “if needed to support demand”.
Stevens made the remarks in a monetary policy speech in Sydney about Australia’s prospects as an Asia-led resources investment boom nears its peak.
“A fall (in mining investment) is in prospect, with uncertain timing. It could be quite a big fall in due course,” he said.
“The post-boom growth story of the economy would desirably involve stronger expansion in some other sectors, including those that have seen weaker-than-normal conditions in the past couple of years.”
For a ‘benign outcome’ in what will be a bumpy transition to non-mining drivers of growth Stevens said “reasonable global growth… would be a major help” along with increased confidence and competitiveness for Australian business and responsive fiscal policy.
Interest rates are at a record low 2.75 per cent but muted inflation data this month spurred talk of an August rate cut to stimulate the economy.
Stevens said the earlier cuts were obviously working “though not, to date, by so much that we see a serious impediment to further easing, were that to be appropriate from an overall macroeconomic point of view”.
“We have been saying recently that the inflation outlook may afford some scope to ease policy further if needed to support demand,” he added.
“The recent inflation data do not appear to have shifted that assessment.”
Inflation came in at just 0.4 per cent in the April to June quarter and 2.4 per cent year-on-year, below expectations for a third consecutive period and well within the RBA’s two to three per cent target range. — AFP