RBA leaves interest rates unchanged at 3pc

By By staff writers and wires, NEWS.com.au, 1 September 2009

THE Reserve Bank has left the official cash rate unchanged at 3 per cent for the fifth month in a row, as widely expected by economists.

Reserve Bank Governor Glenn Stevens said the global economy was "resuming growth", with China growing strongly.

"The major economies appear to be approaching a turning point," he said.

"Unemployment has not, to this point, risen as far as had been expected. Weaker demand for labour, evident in a decline in hours worked, nonetheless has seen a moderation in labour costs," said Mr Stevens.

Australia's economy has been more resilient than expected, wtih spending, exports and business investment holidng up well, the RBA said.

"Most observers still expect only modest growth in the world economy in 2010, due to the continuing legacy of the financial crisis, though forecasts have been revised up recently," Mr Stevens said.

The RBA said the likelihood of inflation staying below the target range of 2-3 per cent is now low, but inflation will be moderate in the near term.

TD Securities senior strategist, Annette Beacher, said the Australian economy is still "fairly fragile." "I think removing the 'emergency' cash rate in the next three months has more risks than not," said Ms Beacher ahead of the RBA decision.

The RBA decision comes ahead of tomorrow's figures on economic growth. That GDP figure is expected to be lower after a drop in exports pushed the current account deficit out to $13.35 billion in the three months to June.

But in a sign the economy is improving, new housing approvals rose by 7.7 per cent, ABS data shows.