Australia leaves interest rates on hold

The Reserve Bank of Australia (RBA) has today elected to keep interest rates on hold at 4.75% – for the seventh time since November.

The move, which was widely expected, comes as the economy slows and pressures mount over inflation.

Australia was the first economy to raise rates from a 50-year low as the economic downturn eased. Other major economies opted for lower interest rates to boost their economies.

The economy, dubbed the “wonder from down under” was one of the few not to have fallen into recession like its counterparts throughout the world as it has benefited from an increase in commodity prices, while exports have received a boost due to demand from China for its iron ore and other raw materials.

However, flood and cyclone disasters, which hit earlier this year, led to a fall in coal and agricultural exports and resulted in the economy contracting in the first quarter – the largest contraction since 1991.

Furthermore, figures yesterday revealed an unexpected fall in retail sales which led analysts to believe the RBA would leave interest rates on hold.

Analysts expect rates to remain on hold for the short-term at least.

Meanwhile, commenting on today’s decision, central bank governor, Glenn Stevens, said: “The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity prices on income and spending in major countries have both contributed to the slowing.”