Australian economy starts to respond to rate cuts

The Reserve Bank of Australia (RBA) said on Tuesday that the most interest rate sensitive parts of Australian economy have started to respond to the recent cash rate cuts. Since late 2011, the RBA has lowered the cash rate six times, by a cumulative 1.75 percentage points, bringing it to its current level of 3.0 percent, the equal lowest level on record. In the minutes of its March 5 board meeting released on Tuesday, the RBA said, "Interest rate sensitive parts of the economy continued to show signs of responding to these low rates and it was likely that this still had further to run." The central bank noted that the Australian economy grew at close to trend pace over the year to the December quarter, but mining investment appeared to be approaching its peak. It said business conditions in Australia were below average and non-mining business investment remained subdued. "With inflation likely to remain around the middle of the inflation target, members judged that there would be scope to cut the cash rate further to support demand, should that be necessary," the RBA said. "At this meeting, the board's assessment was that, while further reductions may be required, on the information currently to hand it was appropriate to hold rates steady, and to assess further developments over the period ahead."