The Reserve Bank of Australia (RBA) has announced it will hold the official cash rate at 2% in March.
The decision comes as global economic indicators continue to deteriorate. In January, the commodity price index dropped to a 10 year low of 83.1. The International Monetary Fund (IMF) expects a downgraded forecast for economic growth in 2016, to 3.4%.
The G20 Summit was held in Shanghai over the weekend, and international leaders were encouraged to pursue further expansionary fiscal and monetary policy. This was demonstrated by the People’s Bank of China, for example, which lowered the reserve requirement ratio for banks by 50 basis points today.
Australia however, is not yet falling in line.
There are sure signs of slowing in the Australian economy, which may call for a cash rate cut later this year. The national unemployment rate was 6% in February, up from 5.8% in the previous month, against a steady participation rate of 65.2%. The steady participation rate suggests that the rise in unemployment was due to lost jobs in the economy.
The increased precariousness of employment and the slowed demand in the economy may be seen in the January 2016 wage growth figures. Year on year, wage growth was at a historical low of just 2.2%.
Inflation at the December quarter was just 1.7%. While this is up from 1.5% in the previous quarter, it is still well below the RBA target band of inflation. This provides room for the RBA to lower the cash rate in the future.Another sign of economic slowdown is across Australian housing markets.
January statistics from show that the median house value across Australia fell 0.81% in the last quarter.