Australia's central bank said it decided to cut interest rates this month rather than wait because it saw further evidence that a peak in the mining investment boom was near, while the non-resource sector showed no signs of picking up.
Yet the Reserve Bank of Australia (RBA) also noted that global economic news had improved and importantly, the pace of growth in China had stabilised, helping underpin key commodity prices. China is Australia's most valuable export market.
"The Board considered whether to respond in the near term or to wait for further information," showed minutes of the Dec. 4 meeting, where the RBA lowered its cash rate by a quarter point to a record-matching low 3.0 percent.
"On balance, members saw merit in reducing the cash rate at this meeting." A softening labour market and easing wage pressures meant the inflation outlook provided "some scope" for further easing to support demand, the minutes showed.
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"Further confirmation that the peak in the resource sector investment was near, and that the short-term outlook for non-resource investment remained subdued, indicated that there was a case for the Board to provide that support," the RBA said.
The RBA, which has cut its cash rate by a total of 125 basis points this year, said lending rates were now "clearly" below their medium-term averages, although they were still above the troughs set during the global financial crisis in 2009.
"Some of the expected effects were starting to be observed and further effects could be anticipated over time," the central bank reiterated.
As usual, the minutes gave no guidance on future policy, but investors have factored in a 60 percent chance of a follow-up move in February, when the central bank next meets. Markets imply the cash rate could fall to 2.5 percent or lower in 2013.
Adding to the case for the RBA to loosen policy further, recent surveys showed business confidence had slumped to levels not seen since 2009, while consumers remained in the doldrums.
Some private sector economists believe the RBA will lower its cash rate by another 100 basis points in 2013 due to a sharp weakening in mining business conditions, a tepid improvement in the non-mining sector, a deterioration in the labour market and a stubbornly strong local dollar.
The minutes only made passing mention of the currency, noting that it remained high.
The RBA expects the mining investment boom to peak sometime next year and is trying to spur other sectors of the economy. RBA Board members noted that recent data suggested that investment outside the mining sector could fall slightly in the fiscal year ending June 2013.