The Reserve Bank has left its key interest rate unchanged for a third month in a row even as signs emerge that the mining boom is fading.
The central bank kept its cash rate unchanged at 3.5 per cent, matching the expectations of market economists.
In recent weeks, BHP Billiton has announced delays to projects worth some $40 billion while Fortescue Metals, the nation's third-largest miner, today unveiled job cuts and project delays as it adjusts to tumbling prices for its iron ore.
In today's statement, central bank governor Glenn Stevens, underscored the positive contribution to the economy coming from the mining sector.
"In Australia, most indicators available for this meeting suggest growth has been running close to trend, led by very large increases in capital spending in the resources sector," Mr Stevens said in the statement. "Consumption growth was also quite firm in the first half of the year, though some of that strength was temporary."
The bank, though, noted that some of the commodity fizz is coming off the economy. Iron ore prices are now just half the levels of a year ago, according to a Chinese gauge.
"Some commodity prices of importance to Australia have fallen sharply in recent weeks," the RBA statement said. "The terms of trade (measuring the relative prices of exports to imports) peaked a year ago and have declined significantly since then, though they remain historically high."
“One gets the impression they’re pretty comfortable about current interest rate settings,” said AMP chief economist Shane Oliver. “It could change. They could spin around pretty quickly as they have in the past.”
“It could quite easily change if the iron ore price stays where it is or if we see another month of weak data like we did in August," said Dr Oliver. Recent ANZ job ads, building approvals and retail sales data were all lower despite four rate cuts since November by the RBA.
“It could quite easily change if the iron ore price stays where it is or if we see another month of weak data like we did in August," said Dr Oliver. Recent ANZ job ads, building approvals and retail sales data were all lower despite four rate cuts since November by the RBA.
That weakness may translate into another rate reducation as soon as next month. "We have a cut pencilled in for October, and another one in December," Mr Oliver said.
The Australian dollar rose about a third of a US cent after the RBA decision, rising above $US1.027 in recent trading, from about $US1.0235 just prior to 2.30pm AEST.
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