The Reserve Bank of Australia kept its key interest rate at a record low to spur hiring in an economy struggling to expand outside the property market. The overnight cash rate target was held at 2.5 percent for a 14th month, Governor Glenn Stevens said in a statement today following an RBA board meeting in Sydney. The decision was predicted by all 26 economists surveyed by Bloomberg News and markets had priced in almost no chance of a move.
The central bank is trying to foster domestic growth, including residential construction, to soak up former mine workers and avoid a growth gap emerging as a resource investment boom fades. While a 7 percent drop in the currency last quarter may encourage companies to open their pocket books and invest, policy makers are struggling to cool property investment that is starting to distort the housing market.
“Increased investor participation in the property market is a concern and the introduction of macroprudential tools looks more likely,” Katrina Ell, an economist at Moody’s Analytics in Sydney, said before the decision. “Rate normalization will not be considered until the labor market shows sustained improvement.”
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