Reserve Bank of Australia (RBA) decided to leave the official cash rate on hold at 2.5% in its October meeting and warned that volatility has gathered momentum in financial markets.
RBA governor Glenn Stevens commented that growth in the global economy is continuing at a moderate pace and commodity prices in historical terms remain high, but some of those important to Australia have declined further in recent months.
Stevens explained that in Australia, most data is consistent with moderate growth in the economy, and resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates.
Growth in wages has declined noticeably and is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.
Stevens added that, in the RBA's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target, and "on present indications, the most prudent course is likely to be a period of stability in interest rates."
The RBA statement also made reference to investors continuing to look for higher returns in response to low rates on safe instruments, and the increase in dwelling prices continuing along with the increase in residential credit growth.