The Reserve Bank has left interest rates on hold, giving mortgage holders their first reprieve since February.
Bank governor Glenn Stevens said in a statement that output growth was likely to be about trend this year, although inflation appeared ''likely to be in the upper half of the target zone over the next year''.
''Consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago. Taking all the available information into account, the board views this setting of monetary policy as appropriate for the near term,'' he said.
The central bank had raised rates six times in the previous eight months, taking them to 4.5 per cent from their low point of 3 per cent in early October. However, most economists believe this will be a pause in the cycle of rate increases, rather than the peak, and the board will resume raising interest rates later this year or early next year.
The decision comes after new figures from the Australian Bureau of Statistics showed a 0.6 per cent rise in retail trade in April, but a 14.8 per cent plunge in the number of building approvals.
The median market forecast was for building approvals to have fallen 5 per cent.
A seasonally adjusted 14,144 dwellings were approved in the month. This included 8404 private sector houses, a 13.5 per cent fall, and 4523 units, a 5.4 per cent fall.
''The seasonally adjusted estimate for the value of total building approved fell 13.3 per cent in April. The seasonally adjusted estimate for the value of new residential building fell 4.6 per cent while the value of residential alterations and additions fell 8.4 per cent. The seasonally adjusted estimate for the value of non-residential building fell 28.5 per cent,'' the bureau said.
There are no seasonally adjusted figures for the ACT, although it recorded a 4.4 per cent increase in trend terms to 341 total dwellings approved. This was the largest increase in the country and compared with a flat national trend result.
However, the ACT recorded one of the country's worst results in retail trade. It was down a seasonally adjusted 0.3 per cent to $380.2 million in April, compared with a 0.6 per cent rise to $20.2 billion nationally. The market had expected a 0.3 per cent national increase.
''Sales rose, in seasonally adjusted terms, across three retail industry groups: household goods retailing (2.6 per cent), food retailing (1.3 per cent) and clothing, footwear and other personal accessory retailing (0.3 per cent). Sales fell in department stores (-2.4 per cent), other retailing (-0.7 per cent) and cafes, restaurants and takeaway food services (-0.7 per cent),'' the bureau said.
Separate data issued by the bureau today also showed government spending rose strongly in the March quarter, up 3.7 per cent. This is expected to add about 0.8 of a percentage point to GDP growth in the quarter.
General government final consumption expenditure rose by 0.8 per cent in the March quarter in seasonally adjusted chain volume terms. Gross fixed capital formation rose by 16.3 per cent and gross fixed capital formation by public corporations rose 3.2 per cent.
Meanwhile, the Australian Industry Group-Price Waterhouse Coopers manufacturing index fell 2.5 points to 56.3 in May. This means the industry remains in expansionary territory because the index is above the neutral mark of 50 points.
Industry group chief executive Heather Ridout said the continuing growth in the sector was a welcome sign the recovery was achieving some traction.
''Unfortunately, the patchiness of the past several months also continues and there are worrying signs of weakness among the consumer-related sub-sectors of the industry,'' she said.
''The sluggishness among the consumer-related sub sectors reflects the cumulative impact of six rate rises out of seven RBA meetings and, to a lesser extent, an erosion of confidence against the background of falling global stock markets and high public debt levels in a number of European countries.''
Source: The Canberra Times
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