The West

The Reserve Bank of Australia s offices in Sydney. Picture: AP.
The Reserve Bank of Australia's offices in Sydney. Picture: AP.

The Reserve Bank has left official interest rates on hold as it waits to see if the Abbott Government cuts deep in next week’s Budget.

Following its monthly meeting, governor Glen Stevens said rates would be left at 2.5 per cent. They have been at that level since August last year.

While noting there has been some improvement in housing construction, and a lift in business conditions, there were still headwinds ahead.

"Resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans," he said.

"Public spending is scheduled to be subdued."

The Reserve Bank cut official rates by a combined 0.75 percentage points at its last two pre-Budget meetings.

Mr Stevens said while there had been some improvement in jobs market, it was going to take some time before unemployment declined.

The Australian dollar continues to be a concern to the bank, with Mr Stevens noting the currency remained high.

"The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months," he said.

With inflation to be consistent with the bank’s 2 to 3 per cent target band, Mr Stevens said the bank had time on its side.

"In the board’s judgment, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target," he said.

"On present indications, the most prudent course is likely to be a period of stability in interest rates."

The West Australian

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