The Reserve Bank has kept official interest rates on hold for another month and signalled it sees signs that past rate cuts are starting to work.
Following its monthly meeting this morning, the bank board left the official cash rate at three per cent.
Governor Glenn Stevens said there was scope to cut rates further but there were early indicators of an improvement in non-resource exposed parts of the economy.
"During 2012, there was a significant easing in monetary policy," he said.
"Though the full impact of this will still take more time to become apparent, there are signs that the easier conditions are having some of the expected effects."
Mr Stevens said inflation was likely to remain within the bank’s target band for the next one to two years.
It appeared businesses were lifting efficiency that would in turn keep a lid on pressures that would also ensure inflation remained in check.
That was pivotal to how the bank would move in coming months.
"The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand," he said.
"At today’s meeting, taking into account the flow of recent information and noting that there had been a substantial easing of policy as a result of previous decisions, the board judged that it was prudent to leave the cash rate unchanged."
The decision follows better than expected January retail sales that grew by 0.9 per cent, and a turn-up in job advertisements through the start of the year.
It was the strongest January for retail sales in six years.
And Federal Chamber of Automotive Industries figures out today showed a further increase in new car sales.
Sales so far this year are 8.1 per cent higher than for January and February last year’s record breaking performance.
Consumer confidence has also moved up through the year although business confidence is still in the doldrums.Measures of Australia’s trade surplus and government spending for the December quarter also suggest that tomorrow’s national accounts will show the overall economy growing close to trend.
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