RBA Minutes Show Household Rate Response is Uncertain

Australia’s central bank said households’ response to easy monetary policy was “unusually uncertain” and it saw an advantage in waiting for more economic data before deciding on further rate reductions. It also warned the nation’s business investment outlook could weaken.

“Members considered that the current setting of monetary policy was accommodative and providing support to the economy,” the Reserve Bank of Australia said in minutes of its April 7 board meeting, where it left the benchmark rate at a record-low 2.25 percent. “They noted that the responsiveness of borrowers and savers to changes in interest rates and asset prices was unusually uncertain in a world of very low interest rates and high household leverage.” The RBA maintained an easing bias.

The central bank, which is trying to engineer a transition in growth drivers from resources to other sectors, said mining investment fell 13 percent in 2014 and was likely to drop by more this year. It noted the oil price decline could prompt “some scaling back” of oil and gas sector spending and said liaison and forward indicators suggested non-mining investment “was likely to remain subdued, and could even decline, over the next year or so.”