Australia marks two years of rates on hold by standing pat

sydney — Australia marked two years since it last moved interest rates by keeping them on hold again on Tuesday, with stubborn wage growth and high household debt acting as a drag on spending.

The Reserve Bank of Australia slashed the cash rate from November 2011 to August 2016 to a record low of 1.50 per cent to boost the economy as it transitioned away from a mining investment boom. Governor Philip Lowe said low rates were providing support to the economy, with growth forecast to average “a bit above” three per cent this year and in

2019. “Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual,” he added.

“Taking account of the available information, the board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

Inflation, which came in at 2.1 per cent over the past year, should push higher over the next two years, the bank said, although it may first slip in the September quarter.

“Once-off declines in some administered prices in the September quarter are expected to result in headline inflation in 2018 being a little lower than earlier expected, at 1.75 per cent,” it said.

The bank has an inflation target of two-three per cent.