Central Banks

RBA: Australia's rebalancing well after mining boom

Australia's central bank saw signs economic activity was rebalancing toward sectors outside of the struggling mining industry when it decided to keep interest rates steady at its October policy meeting.

Minutes of the Reserve Bank of Australia's (RBA) meeting showed board members believed economic growth had picked up in the third quarter after temporary factors caused a near stall in the previous quarter.

Rate cuts earlier in the year were still supporting consumer spending and home building, while a lower local dollar was increasingly driving service exports, the minutes showed.

The labor market had also proved stronger than expected and forward indicators of hiring pointed to the unemployment rate holding steady or falling a little in the months ahead.

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"Given these considerations, the Board judged it was appropriate to leave the cash rate unchanged at this meeting," the minutes showed.

Rates have been at a record low of 2 percent since the last easing in May.

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The RBA offered no guidance on the prospect of a further cut, though financial markets are wagering heavily it will choose to ease again by February of next year.

There has been speculation it could move as early as its Nov. 3 policy meeting, in part to offset a surprise 20-basis point increase in mortgage rates by Westpac, the country's second largest lender.

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Westpac cited the need to cover higher regulatory costs for its mortgage hike, and the RBA Board did note that tighter regulations were having the desired effect in restraining bank lending for home investment.

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The central bank singled out house prices and commercial property as a key risk to financial stability in Australia.

Board members noted there had been tentative signs that price growth in the red-hot Sydney market was finally starting to cool, though it was to early to be certain that this trend would last.

Looking abroad, the Board felt that recent data "raised concerns" about the economic outlook in China and east Asia in general, which had weighed on industrial output in the region.