- Both Domestic, Abroad Econ Fin Develop To Guide Outlook
- Recent Data Raising Concern Abt China, Http://e.asia Econ Growth
- Weak Indus Prod,lower Export Due To Sub-avg Asian Growth
- Spare Capacity Remains,domestic Cost Pressures Very Low
- Labor Mkt Conditions Somewhat Better Vs Expected Earlier
- Jobless Rate To Stay Flat Or Fall Slightly Over Mos Ahead
- Further Evidence Of Rebalance Toward Non-mining Activity
- Some Signs Of An Easing In Sydney Housing Price Rise
- Too Early To Be Confident Hsg Price Slow Wld Be Sustained
- Signs Apra Steps Helping To Manage Risks In Housing Mkt
- China Fixed Invest, Indus Prodn Growth Eased Over 2015
- China Key Indus Output, Incl Steel Lower Vs Late 2014
Considerations for Monetary Policy
Members noted that recent data continued to raise concerns about the outlook for economic growth in China in particular and east Asia more generally, while economic activity in the United States and euro area continued to recover. Below-average growth in the Asian region had been most evident in weak growth in industrial production, which had been mirrored in lower export volumes. While global commodity prices had fallen over the past year, they had been little changed over recent months. Global financial conditions remained very accommodative and low oil prices were expected to continue to provide a measure of support to growth in Australia's major trading partners.
Domestically, the moderate expansion of the economy had continued, although GDP growth in the June quarter was low, in line with expectations, reflecting what appeared to be temporary weakness in resource exports as well as further falls in mining investment. GDP growth had been below average over the past year, but there had been further evidence of rebalancing from the resources sector towards non-mining activity. This rebalancing was being increasingly supported by the depreciation of the Australian dollar, which had led to a noticeable increase in net service exports over the past year.
Members noted that reductions in the cash rate earlier in the year continued to provide support to aggregate demand, particularly dwelling investment and household consumption. Members also noted that conditions in the labour market had strengthened further over recent months and were somewhat better than had been expected earlier in the year. Nevertheless, spare capacity remained in the economy, domestic cost pressures were very low and inflation was expected to remain consistent with the target over the next one to two years.
The key domestic sources of risk to financial stability, and stability of the Australian economy more broadly, revolved around developments in local property markets. Members noted that growth in lending for housing had been steady over recent months and that there were some signs of an easing in the strong rate of increase in dwelling prices in Sydney, in particular, although trends had been more varied in a number of other cities. At the same time, members judged that there were signs that the response of the banks to supervisory measures implemented by APRA were helping to manage risks in the housing market. Credit growth overall had been moderate.
Given these considerations, the Board judged that it was appropriate to leave the cash rate unchanged at this meeting. Information about economic and financial developments, both domestically and abroad, would continue to inform the Board's assessment of the outlook and whether the current stance of policy remained appropriate to foster sustainable growth and inflation consistent with the target.
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