Aussie rates remain at record low

GLENDA KWEK
Last updated 16:39 04/03/2014

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The Reserve Bank of Australia has kept the cash rate on hold at a record low of 2.5 per cent.

The Australian dollar fell shortly after the announcement, dropping from US89.69c to US89.20c.

The central bank, which in February flagged a "period of stability" in interest rates, cut the official cash rate by 2.25 percentage points since November 2011 in an effort to stimulate the non-mining sectors of the economy as resources investment peaks.

Its last rate cut was in August 2013.

Economists had widely expected the central bank to stay its hand this month as it watches the impact of lower rates on the economy.

The RBA moved to a neutral monetary policy stance last month, in part driven by a surprise jump in fourth-quarter inflation figures.

The monthly decision by the Reserve Bank, the second so far this year, followed the release of a raft of economic figures yesterday and today, which together painted a mixed picture of the economy.

Building approvals jumped to their highest monthly growth in more than a decade, with strong rises for both detached houses and apartments, as the interest-rate sensitive housing sector continued to take advantage of the low rates environment, data released by the Bureau of Statistics today showed.

But while the housing market has continued to show signs of growth and job advertisements surged during the same period, the manufacturing sector slowed again and inflation rose towards the top end of the RBA's target band, a series of private surveys published yesterday revealed.

At the same time, fourth-quarter business indicators pointed to a weakening in inventories, but company profits and employee wages rose, further data from the statistics bureau found.

The longest period in recent times for which the RBA kept the official cash rate on hold was between November 2010 and October 2011, when it was held at 4.75 per cent.

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- Sydney Morning Herald

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