The Reserve Bank of Australia (RBA) in Sydney, Australia, 01 September 2015. The RBA announced it will keep interest rates on hold at an historic low of two percent. The Australian bond market has been weighed down by a spike in oil prices, nervousness about China's pace of growth and fears of a September US rate rise. EPA
SYDNEY: Australia's central bank held rates steady for a ninth straight month on Tuesday in a widely expected decision as it sought to balance the risk of busting a debt-fuelled property bubble against subdued inflation and wages growth.
The Reserve Bank of Australia (RBA) kept rates at a record low 1.5%, following easings in August and May last year.
All 71 economists in a Reuters poll expected a steady outcome this week.
The RBA sounded optimistic about economic growth, but added a new line in its statement warning wages growth was expected to remain slow "for a while yet".
"That's the most pessimistic view on wages that we've seen from the RBA in a while," said Michael Blythe, an economist at Commonwealth Bank of Australia. "It seems like they are confident that inflation is expected to remain low for sometime."
Australia's consumer price inflation tiptoed atop 2% last quarter for the first time since 2015 but the RBA's favoured measures of underlying inflation stayed below its target band of 2%-3%.
RBA governor Philip Lowe retained his concerns about the "mixed" labour market but added that forward-looking indicators still pointed to growing employment.
Data released last month showed Australia's jobless rate steadied at a 5.9% in March as employment surged the most in 1-1/2 years, far exceeding expectations.
However, soaring home prices, mainly in Sydney and Melbourne, present a strong argument against any further stimulus.
The surge in home prices in Australia's major cities skidded to a halt in April, a welcome respite for policymakers, although economists say it is too early to call a peak in the red-hot housing sector.
Australian regulators announced measures earlier this year to restrain lending to speculative property investors in a bid to cool the sizzling market and tighten lending standards.
However, a rate hike remains unlikely for now.
"It will be very difficult to lift interest rates if you think inflation pressures are going to be contained for a long time," Blythe added.
Futures market imply scant change to interest rates this year. - Reuters
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
