Australia leaves interest rates on hold

| December 7, 2010 | 0 Comments

The Reserve Bank of Australia (RBA) has today elected to keep interest rates on hold at 4.75% - a move which was widely expected.

Australia was the first economy to raise rates from a 50-year low as the economic downturn eased. Other major economies opted for lower interest rates to boost their economies.

The country is one of the few developed economies not to have fallen into recession like its counterparts throughout the world as it has benefited from an increase in commodity prices, while exports have received a boost due to demand from China for its iron ore and other raw materials.

Many economists believe the RBA will keep interest rates on hold until at least the middle of next year, as a result of a strong Australian dollar and inflationary pressures.

Central bank governor, Glenn Stevens, comments: “The exchange rate has risen significantly this year, reflecting the high level of commodity prices and the respective outlooks for monetary policy in Australia and the major countries.

“This will assist, at the margin, in containing pressure on inflation over the period ahead,” he added.

In the meantime, the jobs market remains strong with the unemployment rate currently at 5.4% - compared with a level of 10% in the euro zone and 9.8% in the US.

Last week, official figures revealed the Australian economy expanded by 0.2% in the July to September period, down from the 1.1% growth reported in the second quarter.

As a result, annual economic growth was 2.7%, significantly lower than the 3.3% previously reported.

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