Australian central bank has already cut forecasts for 2015 economic growth
Sydney - AFP
Australia's central bank left interest rates unchanged at 2.25 percent on Tuesday, but gave a clear signal that further easing was on the cards to help drive down the dollar and spur the economy.
The Reserve Bank of Australia last month cut rates for the first time in 18 months, dropping its cash rate by 25 basis points to a historic low of 2.25 percent to help drive growth.
"At today's meeting the board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being," governor Glenn Stevens said in a statement.
"Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target.
"The board will further assess the case for such action at forthcoming meetings."
The wait-and-see approach comes as a decade-long mining investment boom fades, with growth slowing, inflation low and unemployment at a more than 12-year high.
The RBA noted that commodity prices, such as for major exports iron ore and coal, had slumped in the past year, while growth in key market China was also slowing.
Australian stocks, which had been edging towards the 6,000 point mark for the first time since 2008 in morning trade, fell on the announcement.
Amid fears that a fresh rate cut would inflame an already booming property market, the RBA noted that dwelling prices continued to rise strongly in Sydney but were more varied in other cities.
Balancing this concern, the bank has been keen to see the Australian dollar drop further from its historic highs of recent years. It reiterated Tuesday that the currency was "above most estimates of its fundamental value".
"A lower exchange rate is likely to be needed to achieve balanced growth in the economy," it said.
Keeping rates on hold saw the currency rise to 78.28 US cents from 77.69 US cents.
Greg Gibbs, head of Asia Pacific markets strategy at RBS, said the statement gave "unusually clear guidance.... that they are highly likely to cut again".
"By providing this guidance it appears the RBA is keen to keep a lid on the Australian dollar," Gibbs said.
ANZ chief economist Warren Hogan said the central bank's strong easing bias suggested a cut at the next meeting in April.
"Recent data suggests that more easing may be required beyond April if the economy cannot generate the growth in activity necessary to stabilise the unemployment rate," he said.
Stevens said last month that the RBA was conscious that interest rate cuts could be less effective than in the past in summoning additional growth in demand.
The central bank has already cut forecasts for 2015 economic growth and inflation and warned unemployment will likely rise as the economy transitions away from a mining investment boom.
The Australian Bureau of Statistics releases first quarter gross domestic product data on Wednesday.