Economic Recovery?

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SYDNEY – The Reserve Bank of Australia (RBA) believes it is “too soon” to be certain that the global economy is on the road to recovery, the central bank’s latest board minutes show.

The RBA left the cash rate unchanged at three per cent for the fifth straight meeting on September 1, as board members pondered whether a raft of local and overseas data presented over the previous month was confirmation of an economic recovery.

“Members concluded on balance that the global economy was most likely on a sustained, if modest, recovery path, though it was still too soon to be confident of this assessment,” the minutes said.

The minutes, published today, repeated comments from the August board meeting saying that if the improved prospects for economic growth were realised, the central bank would at some stage lift the cash rate from its current 49-year low.

“At the previous meeting, members had agreed that if the economy continued to evolve as in the latest forecasts, the Bank would in due course need to adopt a less expansionary policy stance,” the minutes said.

The information at this meeting suggested that economic conditions were indeed evolving broadly in that way.

“Nonetheless, some uncertainty remained about the outlook both abroad and at home.”
The minutes said information presented to board members at the meeting “showed that the situation in the global economy was continuing to improve”.

Gross domestic product (GDP) in the Asian region had been much stronger than elsewhere, while there were some “upside surprises” in countries such as Germany and France, the minutes said. Read more