The Reserve Bank of Australia has warned that the global outlook has increased risks to Australia’s economy and cautioned that it is too soon to know whether Chinese efforts to spur growth will be effective. The bank also reiterated its warning that any US Federal Reserve interest rate hike – as soon as this week – could trigger fresh market upheavals.
While the lower Australian dollar was helping offset the impact of falling commodity prices, unemployment is too high and wages pressures remain weak, the central bank said in the minutes of its September meeting, published on Tuesday. The bank also noted that regulatory efforts to curb bank lending to housing investors appeared to be slowing growth in credit to that sector, even though home prices have continued to rise strongly in Sydney.
“Given these considerations, the board judged that it was appropriate to leave the cash rate unchanged,” they said in the minutes. In China, Australia’s biggest export partner, recent economic data continues to suggest that growth has eased. “It was too early to assess accurately the effect of several recent policy changes designed to support activity,” they said.
