The Australian economy continues to transition away from the mining investment boom, but considerable uncertainty around the labour and housing markets remains, the minutes of the October 4 Reserve Bank of Australia (RBA) meetings showed Tuesday.
The RBA noted that, while unemployment had edged down in recent months, broader measures of labour under-utilization have remained unchanged. Meanwhile, housing market conditions had been mixed recently, especially in Sydney and Melbourne, where house price growth continues to accelerate.
“Members noted that data on CPI inflation for the September quarter and an update of the forecasts would be available at the next meeting. This would provide an opportunity to consider the economic outlook, assess the effects of previous reductions in the cash rate and review conditions in the labour and housing markets,” the minutes revealed Tuesday.
The RBA kept its overnight rate unchanged at 1.5% at its October meeting, unchanged from September and in line with the consensus forecast. The RBA’s last rate cut occurred in August, when policymakers voted on a 25 basis point cut.
The Australian central bank has aggressively cut its benchmark interest rate to shore up weak inflation, which is a novel problem for an economy that has consistently experienced above 2% price growth.
Private gauges of inflation and inflation expectations have improved in recent months, a sign that accommodative monetary policies were having their desired effect. The Melbourne Institute’s leading measure of consumer inflation rose 0.4% in September and was up 1.% compared to a year ago. Meanwhile, 12-month inflation expectations also improved to 3.7% in October.
Earlier in the day, RBA Governor Philip Lowe said weak inflation was posing a risk for conventional monetary policy, but remained optimistic that flexible rate targeting would help Australia achieve price stability.