Australia Keeps Rate Unchanged

Australia's central bank maintained its key interest rate at its first meeting of the year and remained upbeat about growth prospects despite slow household income growth.

The board of the Reserve Bank of Australia, governed by Philip Lowe, maintained the cash rate at 1.50 percent, the bank said in a statement on Tuesday. The bank had reduced the rate by 25-basis points each in August and May last year.

Taking account of the available information, the RBA Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

The bank hinted that interest rates are unlikely to rise anytime soon. The low level of interest rates is continuing to support the Australian economy, RBA said.

Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual, the bank observed.

Although the stronger economy is likely to lift wages, the bank expects wages growth to remain low. "Notwithstanding the improving labor market, wage growth remains low," the RBA said.

"This is likely to continue for a while yet," the bank added.

The Bank's central forecast for the Australian economy is for GDP growth to pick up, to average a bit above 3 percent over the next couple of years. At the same time, CPI inflation is forecast to be a bit above 2 percent in 2018.

The RBA pointed out the outlook for household consumption as one continuing source of uncertainty. Household incomes are growing slowly and debt levels are high.