RBA holds rates steady

The Reserve Bank board today held   Australia’s target  interest rate at 3.25 per  cent.

So far, the bank has not explained its decision to keep rates on hold.

But its decision followed the release of new figures, which suggest that the Australian economy has not yet felt the full impact of the global economic crisis.

The Statistician reported, for example, that on seasonally adjusted figures, Australia’s retail trade actually grew by 0.2 per cent in January.

While that growth is small, by any standards, it is still quite remarkable that  there was any growth at all, at that time.

The bureau also reported that Australia’s exports of coal, meat and other goods surged in the December quarter, despite the crisis.

This, too, was unexpected.

And those surprising results, combined, might well have persuaded the Reserve Bank board to hold its hand, at least for now.

The Treasurer, Wayne Swan, is due to speak to reporters very soon, about the decision.

The bank’s decision can be seen as good news.

A substantial cut  in interest rates might well have been taken as a signal that Australia was in even more trouble than  previously thought.

The bank had signaled that it would be cutting interest rates more slowly in future, than it has over recent months.

But, as others have already pointed out, it has done that in the past, then proceeded with big, unexpected changes

Mr Swan tried  yesterday to prepare Australians for the worst.

He warned, bluntly, that the global economic crisis would have  had “a dramatic impact” on Australia’s economic growth in the final three months of  last year.

But he also said,  yet again, that Australia is among the best places in the world to be right now.

There are clear signs, though, that Australians are taking their own precautions.  A new study showed, for example, that almost half of the nation’s baby boomers now believe they will have to postpone their retirement.

Another chilling study concludes, too, that Australia will have an “oversupply” of skilled workers by next year.

But the news isn’t all bad, at least not until it is studied closely.

The Reserve Bank, for example, reported yesterday that its index of commodity prices actually rose by 2.8 per cent in February, in Australian dollar terms.

Coal, beef and veal prices all fell.  But the RBA’s index was still driven upwards, by sharply rising gold prices.

Gold, of course, is a popular refuge, when share prices collapse.