In an address to the National Press Club today, RBA Governor Philip Lowe said the rate hold yesterday “reflects a judgement about the benefits from a further reduction in interest rates against some of the costs and risks associated with very low interest rates.”
He added, a further cut would help households balance sheet adjustment and “bring forward the day that consumption strengthens”. It would also have a further effect on the exchange rate which would ” boost demand for our exports and therefore support jobs growth.” However, there were global concerns on the “resource allocation” and “confidence” on very low interest rates. It could also encourage more borrowing for house purchases and increase risk of problems down the track.
But the board will continue to look at “both sides of the equation”. “If the unemployment rate were to be trending in the wrong direction and there was no further progress being made towards the inflation target, the balance of arguments would change.” There would be a “strong case for further monetary easing” in those circumstances.
