RBA Cut as Doubts Remain over Local Consumption and China

The Reserve Bank of Australia said doubts about a pickup in domestic spending and China’s appetite for raw materials prompted this month’s decision to lower interest rates, and reiterated that the Aussie dollar remains too high.

“There was considerable uncertainty around the timing and extent of the expected increase in household consumption growth and non-mining business investment,” it said in minutes of the first meeting of the year, where it debated whether to cut straight away or wait a month. There was also a lack of clarity on “the outlook for the Chinese property market and its implications for Chinese demand for commodities,” it said.

The RBA ended a 17-month pause as it lowered the nation’s growth and inflation outlook for this year in response to weak investment intentions outside the mining industry. Policy makers are trying to revive confidence and encourage hiring in an economy where unemployment climbed to a 12 1/2 year high.

Bloomberg

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