The Reserve Bank of Australia’s decision to leave the official interest rate unchanged at this month’s board meeting will leave it room to consider further cuts later in the year, according to the minutes of the meeting.
“On balance, they judged that, having made a major change to monetary policy over the preceding several meetings in anticipation of weak economic conditions, the best course for this meeting was to leave the cash rate unchanged,” it said.
“Members believed this would leave adequate flexibility for policy at future meetings.”
The RBA also says it is right on top of the quick decline in global economic conditions and believes consumer and business confidence has been negatively affected by a weak financial sector.
“Although significant macro-economic policy stimulus had been put in place in many countries, it was too soon to see the effects of those measures; in some cases fiscal stimulus had been announced but not yet implemented,” the RBA said.
“The near-term outlook for the global economy therefore remained very weak and official forecasts of world economic growth in 2009 were likely to be revised down further.”
Meanwhile, the Australian sharemarket has opened 1% higher today despite negative leads from Wall Street overnight.
The Dow Jones Industrial Average had its first day in the red in nearly a week, after American Express announced the number of people struggling with debt repayments has grown. The index lost 0.1%.
Back in Australia, the benchmark S&P/ASX200 index was up 54 points or 1.6% to 3402.4 at 12.20 AESDT. The Australian dollar also recorded slight gains to US65 cents.
Commonwealth Bank shares gained 1% to $31.32, while NAB also gained 0.6% to $18.46. Westpac rose 1.6% to $17.41 while AMP dropped 0.5% to $4.12.
Mining giant Rio Tinto will review the terms of a $US19.5 billion deal with Chinese aluminium manufacturer Chinalco after experiencing lengthy regulatory delays, Britain’s Daily Telegraph has reported.
Meanwhile, US President Barack Obama has said that the $US165 million in bonuses paid to AIG executives is an “outrage”, and has directed his Treasury Secretary to pursue legal proceedings to block them.
“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $US165 million in extra pay,” Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”