Due to signs of a stabilising global economy the Reserve Bank has seen no pressing need to cut interest rates in June. For the second month in a row the central bank has left the cash rate steady at 3 per cent.
Minutes from the Reserve Bank board meeting released yesterday have shown that the global economy was starting to steady after two very weak quarters in December last year and March this year.
Recent data showed that growth had picked up in China.
New large capital investments were being made and being financed by strong credit growth.
It was also noted that the value of exports had fallen by around 25 per cent over the past year.
Compared to other countries the domestic economy was relatively untouched and the boardroom left its monetary policy on hold for the month of June.
Board members felt that there was no need for any further action, though they viewed that the inflation outlook had further scope for the easing of monetary policy if that were required to support demand at a later stage.
Board members also noted that the local economy was benefiting from historical low interest rates and additional government spending which represented the largest macroeconomic policy stimulus over recent decades.
It was also noted in the minutes that monetary policy had been eased significantly, and budgetary measure was also providing significant support to demand. The outcomes of these policies were seen to be having some impact, though the full effects were yet to be seen in the foreseeable future.
Board members were cautiously optimistic that budgeted targets would be met with data indicating stronger growth than previous forecasts. It was further anticipated that a fairly gradual expansion was due to commence later in the year, with spare capacity tending to increase and inflation tending to decline.