The Decision Of Reserve Bank Of Australia

1595 Words Apr 20th, 2015 7 Pages
This essay investigates the possible decision of Reserve Bank of Australia (RBA) about cash rate to be made on 5 May 2015.The appropriated level of cash rate depends on the current economic conditions, both domestically and internationally. Also, it will be based on the three main objectives of monetary policy including price stability, full employment and the stability in economic growth. This essay will discuss the current economic conditions which are consistent to the tendency of cash rate that might be cut from 2.5 to 2 per cent in the next meeting. The essay provides three arguments for this possible decision including the decline in in business investment and business confidence, low commodity prices and the economic growth in major trading partners of Australia
The RBA should cut the cash rate below 2.25 per cent due to the weakness of the domestic economy. The decline in business investment and confidence are the major concerns leading to the slow growth in economy (NAB Group Economics [NAB], 2015). According to RBA, Mining investment, is the major contrition to business investment in Australian economy, has been expected to decline further (Reserve Bank of Australia [RBA], 2015b). The decision of RBA on cash rate in 3 March 2015 also mentioned that there is a slow growth in steel production and the competition of low-cost iron ore from producers in other countries (RBA, 2015b). This can appear that mining investment is less likely to contribute into the…
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