SYDNEY - Australia’s central bank said there were “reasonable prospects” for continued economic growth and it was still too early to assess whether a bout of global market volatility early in the year foreshadowed something more sinister.
Low inflation would give it room to ease policy but only if it was “appropriate to lend support to demand”, the Reserve Bank of Australia (RBA) said in minutes of its March 1 policy review, where it kept the cash rate steady at a record low 2.0 percent for a 10th month running.
“There had been further indications of a rebalancing of activity towards the non-mining sectors of the economy. More recent data had suggested that the economy had continued to grow at a moderate pace in early 2016,” the RBA said.
“Members judged that there were reasonable prospects for continued growth in the economy and that it was appropriate to leave the cash rate unchanged at an accommodative setting.”
The RBA cited low interest rates, above-average employment growth and a depreciation of the exchange rate over the past couple of years as factors underpinning the economy. It made no mention of a recent rebound in the local dollar.
“Over the period ahead, new informational should allow the Board to assess whether the improvement in labor market conditions was continuing and whether the recent financial turbulence presaged weaker global and domestic demand.”
Members spent part of the meeting discussing China, Australia’s single biggest export market.
“They observed that demographic changes and strong productivity growth had been key drivers of economic growth in China for some time, but these forces were now reversing and were likely to weigh on further growth as a result,” the minutes said.
However, the process of urbanization still had some way to run in China and that would tend to support growth in the working age population.
The RBA also noted that Chinese household incomes are likely to rise over time, creating long-run potential for Australia to increase exports of rural produce and services, including tourism, to China.