Business

Published: Tuesday August 4, 2009 MYT 3:44:00 PM

Australian interest rate remains at 49-year low


CANBERRA: Australia's central bank left its benchmark interest rate at a 49-year low of 3 percent on Tuesday, saying strengthening economic conditions and consumer spending reduced the chance of a recession.

It was the fourth month in a row that the Reserve Bank of Australia left its cash rate unchanged.

The decision matched market expectations.

RBA governor Glenn Stevens said economic conditions in Australia were stronger than a few months ago, with resilient consumer spending and exports.

"This suggests that the risk of a severe contraction in the Australian economy has abated," he said in a statement.

"The most likely outcome in the near term is a period of sluggish output, with consumer spending likely to slow somewhat and investment remaining weak."

In a sign that interest rates are more likely to go up, the central bank said it was more concerned about fast how the economy would grow, rather than contract.

"The board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for sustainable growth in economic activity and achieving the inflation target," Stevens said.

He said the global economy was stabilizing, led by China, which was having a positive impact on other economies in the region.

The statement said Australian business borrowing was still in decline as companies postponed investment plans and sought to reduce debt. - AP


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