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Rates Stay on Hold
The interest rate remains at a 12-year high after the RBA raised the rate four times since August last year. The announcement came hours after building approvals figures showed surprising resilience in the housing market.
Building approvals rose 7.8% in April from March, and were 5.2% higher than a year ago, according to the Australian Bureau of Statistics.
Also, the current account deficit widened to a record $19.5 billion in the March quarter, from a revised $18.7 billion in the previous three months.
That gap, about $1 billion better than the $20.5 billion current account deficit forecast by economists, comes on the back of record prices for iron ore and coal.
In Mr Stevens' last statement, made in May, he cited a substantial tightening of financial conditions in the middle of last year. The slowdown has occurred against a backdrop of larger-than-expected growth in terms of trade." Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation," Mr Stevens wrote.
"In the short term, inflation is likely to remain relatively high, but it should decline over time provided demand evolves as expected." The bank's own measure of annual inflation has risen to 4.4%, above its preferred range of 2-3%.
Author: Chris Zappone
Date: June 3, 2008
Publication: Sydney Morning Herald
