3) to keep its main interest rate at 2%, despite widespread expectations that the central bank would cut rates to cushion Australias sagging economy. The economy grew 0.2% in the second quarter this year, a slowdown from 0.9% in the first and the worst quarterly GDP number in four years. From Quartz in September after his election: The problems are so deep that Australias new prime minister, ex-investment banker and barrister Malcolm Turnbull, backed his whirlwind run for office on fixing them.
The country’s currency, still known as the Australian dollar as of this writing, popped after the news as currency traders took advantage of mismatched expectations.
(Typically, higher interest rates are good for a currency and lower interest rates tend to weaken currencies. So the fact that rates stayed higher-than-expected explains some of the peppiness of the Australian dollar in aftermath of the RBA announcement.)
Australia’s economy, known for being relatively recession-proof, has been having trouble sustaining satisfactory GDP growth lately. The economy grew 0.2% in the second quarter this year, a slowdown from 0.9% in the first and the worst quarterly GDP number in four years.
A key reason for those economic headwinds is a global commodity slump, including major Aussie export iron ore, which the RBA mentioned in the second paragraph of its policy statement (“Key commodity prices are much lower than a year ago, in part reflecting increased supply, including from Australia.”) Read more…