Australia holds rates steady ahead of budget

SYDNEY: Australia’s central bank held interest rates at a record low 1.50 per cent on Tuesday after annual inflation moved back into its target range, as it treads water ahead of the federal budget next week.

The Reserve Bank of Australia slashed 300 basis points from borrowing costs between November 2011 and August last year to support non-resources industries as the economy transitions out of a mining investment boom. It has remained on hold since then. Headline inflation moving back into its 2-3 per cent target band in the March quarter for the first time since 2014 was widely seen as reducing pressure to cut again.

But with household debt levels soaring due to an overheating property market, coupled with low wages growth and unemployment stuck at 5.9 per cent, the bank is also reluctant to hike.

Consumer prices rose 0.5 per cent in the March quarter, taking the annual rate to 2.1 per cent, data showed last week. This was up from 1.5 per cent in October-December, but slightly below forecast. In a statement, Reserve Bank Governor Philip Lowe said holding fire was “consistent with sustainable growth in the economy and achieving the inflation target over time”. The decision to stay on hold was widely expected by economists ahead of the May 9 budget, which is tipped to include measures to address housing affordability and boost infrastructure spending. — AFP