* RBA keeps rates at 2.5 pct, signals more of the same
* Economy thought to have grown modest 0.4 pct in Q2
* Net exports take 0.9 ppt off Q2 GDP, govt spending muted
* Strength in home building, prices to support growth in H2
By Wayne Cole
SYDNEY, Sept 2 Australia's central bank kept
interest rates at record lows for the 12th straight policy
meeting on Tuesday and seemed content to stay on the sidelines
for a while to come as the economy wrestles with a waning mining
The local dollar held at $0.9295 as the Reserve
Bank of Australia (RBA) said the currency was overvalued by most
measures but stopped short of actively trying to talk it down.
"Looking ahead, continued accommodative monetary policy
should provide support to demand and help growth to strengthen
over time," said RBA Governor Glenn Stevens, in a statement that
made much use of the word "moderate" to describe the economy.
"On present indications, the most prudent course is likely
to be a period of stability in interest rates."
All 23 analysts polled by Reuters had expected the benchmark
rate to stay at 2.5 percent this month, where it has been since
the last easing in August 2013. The vast majority assume the
next move will be up, although not until the first half of 2015
at the earliest.
The RBA has sounded reluctant to ease again, in part for
fear of adding fuel to an already hot housing market.
Home prices have picked up smartly in the past three months,
taking annual growth to near 11 percent, according to property
consultant RP Data.
Futures markets <0#YIB:> are still pricing in a modest
chance of one more cut in rates, in large part because the
economy is not growing fast enough to keep down unemployment,
which recently hit a 12-year peak of 6.2 percent.
Data on Australia's gross domestic product (GDP) in
April-June is due on Wednesday and signs are that growth slowed
markedly from the first quarter's surprisingly brisk 1.1
Median forecasts in a Reuters poll favour a rise of 0.4
percent for the second quarter compared with the first, the
smallest in over a year.
Partly to blame was weakness in consumer spending over April
and May, when sentiment was spooked by a government campaign to
justify a budget of spending cuts and higher charges.
Australia's trade performance also turned into a drag after
a very strong performance in the first quarter. The current
account deficit yawned out to A$13.7 billion ($12.7 billion)
from A$7.8 billion, the widest gap since late 2012.
With export volumes dipping 0.6 percent and imports
rebounding by 3.7 percent, trade shaved 0.9 percentage point
from GDP in the quarter.
Fortunately that was balanced by businesses rebuilding
inventories, which looked to have added a whole percentage point
Also helping was a revival in home building as low rates and
double-digit gains in house prices drive new supply after
several fallow years for the sector.
That expansion looked to have a lot further to run, with
approvals to build new homes climbing 2.5 percent in July,
handily topping market forecasts of a 1.5 percent increase.
That left approvals 9.4 percent higher than in July last
year, while growth in houses was even stronger at 14 percent.
For the whole year to July, approvals were a record 195,227.
All that activity will be very much needed as mining
spending is set to fall steeply over the next few years as a
decade-long investment boom comes to maturity.
How this handover from mining proceeds is the single biggest
uncertainty for policy makers and a major reason rates are
likely to stay low for many months to come.
"The fall-off in investment spending by resources companies
has a long way to go yet and will probably accelerate in the
coming year," the RBA's Stevens cautioned last month.
"This impending further fall is captivating most of the
(Reporting by Wayne Cole; Editing by Alan Raybould)