The Reserve Bank has kept official interest rates on hold but given clear indications it is worrying about events overseas and domestically.
Following its monthly meeting this morning, the bank’s board left the official cash rate at 3.5 per cent.
The Reserve last cut rates in June when it sliced the official cash rate by a quarter percentage point.
Governor Glenn Stevens said the bank was comfortable with the current setting for rates.
“As a result of the sequence of earlier decisions, interest rates for borrowers are a little below their medium-term averages,” he said.
“The impact of those changes is still working its way through the economy, but dwelling prices have firmed a little and business credit has picked up this year.”
But the statement did highlight a series of pressures facing both the domestic and global economy.
Mr Stevens noted that while the strong Australian dollar had fallen slightly in recent months it was still higher than expected.
He also pointed out that growth in China had been robust in the first half of this year although there was some uncertainty over the “near-term”.
“Around Asia generally, growth is being dampened by the more moderate Chinese expansion and the weakness in Europe,” he said.
“Markets for key natural resources are adjusting accordingly. Some commodity prices of importance to Australia have fallen sharply in recent weeks.”
Mr Stevens added that domestically the situation was still reasonable.
“In Australia, most indicators available for this meeting suggest growth has been running close to trend, led by very large increases in capital spending in the resources sector,” he said.
“Consumption growth was also quite firm in the first half of the year, though some of that strength was temporary.
“Labour market data have shown moderate employment growth, even with job shedding in some industries, and the rate of unemployment has thus far remained low.”
It follows a series of weaker economic indicators over recent days including a large slide in job advertisements, a drop in company profits and a slide in manufacturing output.There are also fresh concerns about the size of the mining boom after Fortescue Metals announced today it was scaling back its capital spending by $1.6 billion while cutting staff to keep a lid on operating costs.
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