Statement by Glenn Stevens, Governor: Monetary Policy Decision
At its meeting today, the Board decided to leave the cash rate unchanged at 4.5 per cent.

The global economy grew faster than trend over the year to mid 2010, but will probably ease back to about trend pace over the coming year. Recent information is consistent with a more sustainable, but still strong, pace of growth in China and most of the Asian region. In Europe and the United States, growth prospects appear to be modest in the near term, a legacy of the financial crisis and its impact on private and public finances. Financial markets are still characterised by a degree of uncertainty, and are responding both to differences in growth outlooks between regions and evident strains on public finances and banking systems in several smaller countries in Europe. Most commodity prices have changed little over recent months, and those most important to Australia remain very high.

Information on the Australian economy shows growth around trend over the past year. Public spending was prominent in driving aggregate demand for several quarters but this impact is now lessening, while the prospects for private demand, and in particular business investment, have been improving. This is to be expected given the large rise in Australia’s terms of trade, which is now boosting national income very substantially.

Asset values are not moving notably in either direction, and overall credit growth is quite subdued at this stage, notwithstanding evidence of some greater willingness to lend. Inflation has moderated from the excessive pace of 2008. The effects of the rise in tobacco taxes aside, CPI inflation has been running at around 2¾ per cent over the past year. That looks likely to continue in the near term.

The current stance of monetary policy is delivering interest rates to borrowers close to their average of the past decade. The Board regards this as appropriate for the time being. If economic conditions evolve as the Board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target.
Link -
http://www.rba.gov.au/media-releases/2010/mr-10-23.html
Note: Article bold is me.
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The Global Economy now rests with Wile. E Coyote hanging ten at the precipice.

Europe & particularly the USA are still where most Demand comes from and if their Demand slows, which I anticipate it will, then Production in China, Japan & the rest of Asia starts to stall, which then flows thru to less Demand for OZ Resoucres.

Any small nudge and both Wile.E & the rest of us, will find out what gravity really means!

Australia, like the rest of the world (ROW), has had its GDP driven artificially higher, by Keynesian Spending, which can not sustain long term structural problems and that spending is now running down, both here in OZ & elsewhere around the world, although it may still get one more burst in the USA.  

The RBA, like OZ Politicians, as well as Politicians & Central Bankers in many other countries, are trying to talk their way out of the dilemma's we face.

They are either deliberately understating the scope of the problems, hoping that it will all go away, like it has for pretty much the last 80 years or worse still, they really don't understand that an Economic Paradigm shift is talking place!

Equitist wrote on Oct 5^th, 2010 at 2:26pm:






LOL

Any WONDER !



His preparared speech was on how the Gillard Government are to blame for the (expected) RISE

NOW he has to back-track and say the economy NEEDED the rise - and how the Gillard Government are to blame for this not happening

codswal wrote on Oct 5^th, 2010 at 2:36pm:



That 'poverty and filth' has been there since time immemorial.  Despite that, India's economy is booming apart from a substantial increase in their current account deficit.  The projected GDP growth for 2010 is 7.2 percent. They have never had it so good.

Europe on the other hand is in a bit of a bind right now, being weighed down by the debt of its poorer members. The Brits seem to be benefitting significantly by having their own currency.

The US is in very scary territory.

codswal wrote on Oct 5^th, 2010 at 2:36pm:


I must say, I would be more than a little annoyed at the Irish Pollies, Banks & Establishment, for allowing their Debt situation to arise!

And, I could see the point of the French, where their Pollies, Banks & Establishment allowed a situation to arise, where "all of a sudden (?)", they find it neceassary to extend their retirement age from 60 to 62 immediately and then to "phase in" a retirement age of 67, by 2018?

Too bad, if you had been planning for the last 10 years, to retire at 60, on January 1st, 2019?