Identifier
Created
Classification
Origin
09CANBERRA214
2009-03-03 21:13:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Canberra
Cable title:
AUSTRALIAN RESERVE BANK HOLDS RATES AMID MIXED ECONOMIC
how-toVZCZCXRO8391 RR RUEHPT DE RUEHBY #0214 0622113 ZNR UUUUU ZZH R 032113Z MAR 09 FM AMEMBASSY CANBERRA TO RUEHC/SECSTATE WASHDC 1139 INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC RUEATRS/DEPT OF TREASURY WASHINGTON DC RUEHDN/AMCONSUL SYDNEY 4312 RUEHBN/AMCONSUL MELBOURNE 6099 RUEHPT/AMCONSUL PERTH 4363 RUEHWL/AMEMBASSY WELLINGTON 5653 RUEHLO/AMEMBASSY LONDON 2006 RUEHKO/AMEMBASSY TOKYO 3429 RUEHGP/AMEMBASSY SINGAPORE 1683 RUEHBJ/AMEMBASSY BEIJING 9379
UNCLAS CANBERRA 000214
SENSITIVE
SIPDIS
STATE FOR EEB AND EAP/ANZ
TAGS: EFIN ECON AS
SUBJECT: AUSTRALIAN RESERVE BANK HOLDS RATES AMID MIXED ECONOMIC
NEWS
UNCLAS CANBERRA 000214
SENSITIVE
SIPDIS
STATE FOR EEB AND EAP/ANZ
TAGS: EFIN ECON AS
SUBJECT: AUSTRALIAN RESERVE BANK HOLDS RATES AMID MIXED ECONOMIC
NEWS
1. (U) SUMMARY: The Reserve Bank of Australia decided to leave
interest rates unchanged at 3.25%, despite mixed economic news and
increased reports of job losses. The RBA indicated that monetary and
fiscal policy changes have been significant and need to work through
the Australian economy before further changes are considered. END
SUMMARY.
2. (U) The RBA decided March 3 to leave the cash rate unchanged at
3.25 per cent. In a statement released by Governor Glenn Stevens,
the RBA noted the world economy remains "very weak", but emphasized
that demand in Australia has not weakened as much as in other
countries. Stevens said that the Australian economy has not
experienced the sort of large contraction seen elsewhere, the
Australian financial system remains strong and monetary policy (400
basis point cut in the rate since September) is delivering large
reductions in interest rates to end borrowers. The RBA concluded
that very low market, mortgage rates, and business loan rates plus
the GOA's fiscal stimulus packages would significantly support
demand, so a further interest rate cut was not necessary.
3. (U) The decision to leave the rate unchanged was a mild surprise.
A string of mixed economic news over recent days had created an
expectation of a cut. On the good side of the ledger was a
better-than-expected performance in the retail sector, with sales up
0.2 per cent over January in seasonally adjusted terms. The Housing
Industry Association on March 3 reported that new home sales jumped
8% in January from the previous month - boosted by the increase in
the first-time buyer assistance from the first stimulus package.
4. (U) On the negative side, job losses continue to mount. Last week
Pacific Brands, Australia's largest clothing manufacturer, announced
it would shift its domestic manufacturing to China at a cost of 1850
jobs. Anglo Coal announced it will cut 650 mining jobs in Queensland
and New South Wales, while car parts maker Robert Bosch is making
170 workers redundant. The Australian Bureau of Statistics announced
March 2 large drops in company profits (6.5% for the December
quarter - only the mining sector showing an increase) and in
inventory (1.9%),with experts uncertain whether that was the result
of the stimulus-fueled better-than-expected Christmas season or due
to firms slashing orders.
5. (U) On March 4 the December quarter national accounts will be
released. Some fear it could be negative, and that growth for the
September quarter may be revised downward from 0.1% possibly to
negative territory - meaning Australia would have entered recession
in 2008. However, the RBA has access to the national account data
and presumably judged that the news was not sufficiently negative to
cut justify another cut in interest rates. A bump in inflation in
January and February indicated by the TD-Melbourne Institute - and
rising gasoline prices - probably also contributed to the RBA's
non-move. There has been positive news on Australia's external
accounts, with a current account deficit of $A6.5 billion in the
December quarter. The deficit has narrowed by nearly A$3 billion, or
about a third, from the quarter before. The surplus on goods and
services increased by A$2.7 billion to A$4.1 billion in the December
Qservices increased by A$2.7 billion to A$4.1 billion in the December
quarter. Australia's net foreign debt is still of concern at $A678.3
billion. However, bad news is likely in the future and now seven out
Australia's ten top trading partners are in recession.
5. (SBU) COMMENT: The Reserve Bank's decision to leave monetary
policy unchanged suggests that it has confidence in the impact of
the GOA's fiscal stimulus policies and the significant lowering of
interest rates that has also occurred. A factor not mentioned by the
RBA is that Australia needs to continue to attract international
portfolio and direct investment to finance its current account
deficit and large foreign debt. Maintaining higher interest rates is
likely to support such flows. END COMMENT.
CLUNE
SENSITIVE
SIPDIS
STATE FOR EEB AND EAP/ANZ
TAGS: EFIN ECON AS
SUBJECT: AUSTRALIAN RESERVE BANK HOLDS RATES AMID MIXED ECONOMIC
NEWS
1. (U) SUMMARY: The Reserve Bank of Australia decided to leave
interest rates unchanged at 3.25%, despite mixed economic news and
increased reports of job losses. The RBA indicated that monetary and
fiscal policy changes have been significant and need to work through
the Australian economy before further changes are considered. END
SUMMARY.
2. (U) The RBA decided March 3 to leave the cash rate unchanged at
3.25 per cent. In a statement released by Governor Glenn Stevens,
the RBA noted the world economy remains "very weak", but emphasized
that demand in Australia has not weakened as much as in other
countries. Stevens said that the Australian economy has not
experienced the sort of large contraction seen elsewhere, the
Australian financial system remains strong and monetary policy (400
basis point cut in the rate since September) is delivering large
reductions in interest rates to end borrowers. The RBA concluded
that very low market, mortgage rates, and business loan rates plus
the GOA's fiscal stimulus packages would significantly support
demand, so a further interest rate cut was not necessary.
3. (U) The decision to leave the rate unchanged was a mild surprise.
A string of mixed economic news over recent days had created an
expectation of a cut. On the good side of the ledger was a
better-than-expected performance in the retail sector, with sales up
0.2 per cent over January in seasonally adjusted terms. The Housing
Industry Association on March 3 reported that new home sales jumped
8% in January from the previous month - boosted by the increase in
the first-time buyer assistance from the first stimulus package.
4. (U) On the negative side, job losses continue to mount. Last week
Pacific Brands, Australia's largest clothing manufacturer, announced
it would shift its domestic manufacturing to China at a cost of 1850
jobs. Anglo Coal announced it will cut 650 mining jobs in Queensland
and New South Wales, while car parts maker Robert Bosch is making
170 workers redundant. The Australian Bureau of Statistics announced
March 2 large drops in company profits (6.5% for the December
quarter - only the mining sector showing an increase) and in
inventory (1.9%),with experts uncertain whether that was the result
of the stimulus-fueled better-than-expected Christmas season or due
to firms slashing orders.
5. (U) On March 4 the December quarter national accounts will be
released. Some fear it could be negative, and that growth for the
September quarter may be revised downward from 0.1% possibly to
negative territory - meaning Australia would have entered recession
in 2008. However, the RBA has access to the national account data
and presumably judged that the news was not sufficiently negative to
cut justify another cut in interest rates. A bump in inflation in
January and February indicated by the TD-Melbourne Institute - and
rising gasoline prices - probably also contributed to the RBA's
non-move. There has been positive news on Australia's external
accounts, with a current account deficit of $A6.5 billion in the
December quarter. The deficit has narrowed by nearly A$3 billion, or
about a third, from the quarter before. The surplus on goods and
services increased by A$2.7 billion to A$4.1 billion in the December
Qservices increased by A$2.7 billion to A$4.1 billion in the December
quarter. Australia's net foreign debt is still of concern at $A678.3
billion. However, bad news is likely in the future and now seven out
Australia's ten top trading partners are in recession.
5. (SBU) COMMENT: The Reserve Bank's decision to leave monetary
policy unchanged suggests that it has confidence in the impact of
the GOA's fiscal stimulus policies and the significant lowering of
interest rates that has also occurred. A factor not mentioned by the
RBA is that Australia needs to continue to attract international
portfolio and direct investment to finance its current account
deficit and large foreign debt. Maintaining higher interest rates is
likely to support such flows. END COMMENT.
CLUNE