RBA keeps interest rates unchanged

AAP

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THE Reserve Bank of Australia (RBA) has left the cash rate unchanged at 4.5 per cent for a second consecutive month.

In a statement accompanying the central bank's decision, RBA governor Glenn Stevens said the current setting of monetary policy was resulting in interest rates to borrowers around the average levels of the past decade.

"Pending further information about international and local conditions for demand and prices, the board views this setting of monetary policy as appropriate," Mr Stevens said on Tuesday.

While the global economic outlook has seen some improvement in the first half of 2010, debt concerns in Europe and the threat of a double-dip recession in the US have shaken market confidence over the last two months.

"The global economy has continued to expand over recent months, consistent with a trend pace of growth," Mr Stevens said.

"Caution in financial markets has been evident in the past couple of months, driven principally by concerns about European sovereigns and banks but also by some uncertainty about the pace of future global growth." he said.

Despite these concerns, Australian economic conditions should continue to stabilise for the rest of 2010, with consumers regaining some of the confidence they had prior to the global financial crash of late 2008 and most of 2009.

"Consumption spending is recording a modest increase at present, with households displaying a degree of caution, but most indicators suggest business investment will increase over the coming year.

"The labour market has continued to firm gradually, and after the significant decline last year, growth in wages has picked up a little, as had been expected."