The RBA cut by 0.25% to 2.75%

From Glenn Stevens’ accompanying statement:

  • The global economy is likely to record growth a little below trend this year, before picking up next year
  • Growth in Australia was close to trend in 2012 overall, but was a bit below trend in the second half of the year, and this appears to have continued into 2013.
  • the peak in the level of resources sector investment likely to occur this year
  • There has been a strengthening in consumption and a modest firming in dwelling investment, and prospects are for some increase in business investment outside the resources sector over the next year. Exports of raw materials are increasing as increased capacity comes on stream.
  • inflation is consistent with the target and, if anything, a little lower than expected.
  • The exchange rate, on the other hand, has been little changed at a historically high level over the past 18 months, which is unusual given the decline in export prices and interest rates during that time.
  • Moreover, the demand for credit remains, at this point, relatively subdued.
  • The Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand. At today’s meeting the Board decided to use some of that scope. It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.

Note the last paragraph – the RBA decided to use some of that scope. There is still an easing bias going forward.