RBA Believes Currency Drop Insufficient to Drive Growth Transition

The Australian dollar’s 7 percent decline in the past month is insufficient to spur the nation’s transition to domestic drivers of growth, the central bank said today as it kept its benchmark interest rate unchanged.

“The exchange rate has declined recently, in large part reflecting the strengthening U.S. dollar, but remains high by historical standards, particularly given the further declines in key commodity prices in recent months,” Governor Glenn Stevens said in a statement today after a board meeting in Sydney. “It is offering less assistance than would normally be expected in achieving balanced growth in the economy.”

The Reserve Bank of Australia signaled little comfort in the currency’s lower level as it tries to foster demand and avoid a growth gap emerging from a fading resource investment boom. Stevens is also grappling with how to damp property investors speculating in the housing market, encouraged by the record-low 2.5 percent cash rate.

Bloomberg

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