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No need for a May Day rescue

By Marilyn Campton

The Reserve Bank saw no need for change during its May Day meeting this week, leaving the official cash rate sitting on 1.5 per cent.

In a statement announcing the decision, Reserve Bank Governor Philip Lowe noted that the Bank’s central forecast for the Australian economy remains for growth to pick up, to average a bit above 3 per cent in 2018 and 2019.

Business conditions are positive and non-mining business investment is increasing, while higher levels of public infrastructure investment are also supporting the economy and stronger growth in exports is expected.

Governor Lowe also remarked on the strong growth in employment over the past year, which has been ‘accompanied by a significant rise in labour force participation, particularly by women and older Australians’.

“Notwithstanding the improving labour market, wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time.

“The low level of interest rates is continuing to support the Australian economy”, he said, adding that further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.

“Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”, he concluded.

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