Australia's central bank kept interest rates steady for a seventh month on Tuesday as data showed exports provided a huge lift to the economy last quarter and helped fill a gaping hole left by business investment. The Reserve Bank of Australia (RBA) did again note that low inflation meant there was room for a cut in the 2 percent cash rate should signs of recovery disappoint in coming months.
But for now it sounded content to hug the sidelines. "The Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate," said RBA Governor Glenn Stevens in a statement. All 22 analysts in a Reuters poll had tipped a steady outcome this week and markets had priced in almost no chance of a move. That limited the impact on the local dollar which was up on the day at $0.7270.
Interbank futures still imply around a 50-50 chance of an easing next year, with the RBA's next meeting in early February. Policy makers have been encouraged by signs of recovery ranging from strong employment to better business sentiment and a big boost to tourism from a low local dollar. Data due on Wednesday should show the economy regained some momentum in the third quarter after a lacklustre second quarter. Net exports alone likely added an eye-popping 1.5 percentage points to growth - their biggest contribution since early 2009 - as export volumes jumped 5 percent while imports fell 2 percent.