Rate Cuts on Hold as Economy Grows

The Reserve Bank of Australia is not likely to issue rate cuts this month, following a push in the economy. Reports say that during the RBA’s recent board meeting, the issue on rate cuts was apparently left on hold because the Australian economy has experienced a little push.

The slight change was actually more than what economists had predicted. The Australian dollar rose to at least three-quarters behind the US currency at US102.97¢.

Members of RBA’s board felt that because of this, no rate cuts should be applied. Banks are now on a wait-and-see mode and industry analysts say the situation could stay like this for months.

Major economists, however, said that a soon-to-be-released consumer price index could trigger a rate cut in August. They added that the RBA is likely to give rate cuts a break as it assesses the effect and impact of earlier policy easing on the domestic economy.

The RBA remains confident they can keep the situation contained.

Treasurer Wayne Swan also confirmed that the Australian economy is “riding out” the turmoil in Europe. In an interview, Swan said that despite the economic challenges Europe is facing, the strong Australian dollar and structural changes being implemented make the Australian economy a league of its own.

In addition to this, Australia’s container port has surged to at least 9.1 percent in trade, with 87 million revenue tones.

Analysts, however, still think there are still many risks, particularly with over-investment boom coming from China.