SYDNEY--Australia's central bank left its benchmark interest
rate at a record low for a 13th-straight month Tuesday, after
predicting slower-than-average growth ahead as the nation's mining
boom slows and its currency remains strong.
The Reserve Bank of Australia left its policy rate at 2.5%,
saying more time was needed to support the transition away from
mining.
"Moderate growth in the economy is occurring," RBA Gov. Glenn
Stevens said in a statement. "Overall the bank still expects growth
to be a little below trend over the year ahead."
Non-mining sectors of the economy, especially housing
construction, are slowly recovering, but unemployment has meanwhile
risen to its highest levels in 12 years, stirring caution among
policy makers.
The central bank downgraded its forecasts for growth and
inflation last month, and Mr. Stevens urged businesses to embrace
"animal spirits" by investing and employing more people.
With an eye on the job market, the bank is also watching house
prices, which are rising at the fastest pace in four years, fueled
by cheap money and demand from property investors.
The Australian dollar remains a problem from a policy
standpoint. It has remained well above 90 U.S. cents this year,
despite falling commodity prices.
The price of iron ore, the country's biggest export, has fallen
below US$90 a ton in recent weeks and is threatening to drop below
lows seen after the global financial crisis.
Mr. Stevens has warned the currency is overvalued, telling
markets that it's overdue for a substantial fall to match a
stronger U.S. dollar and the decline in commodity prices.
Early Tuesday, financial markets were pricing in a 20% chance
the next move in interest rates would be down by the end of the
year. The Australian dollar, which fell about a third of a U.S.
cent ahead of the central bank's statement to US$0.9293, was little
changed immediately afterward.
Government data published before the statement showed a big
deterioration in Australia's current-account deficit in the second
quarter. The deficit widened to a seasonally adjusted A$13.7
billion in the second quarter from a revised A$7.8 billion in the
first.
Mr. Stevens will speak Wednesday just after the release of data
on second-quarter gross domestic product. Most economists expect a
relatively soft result. with falling commodity prices and declining
mining investment offsetting improvement elsewhere.
-Write to James Glynn at james.glynn@wsj.com
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