2014.08.0506:58:46UTC+00Australian rates still at record low

The Royal Bank of Australia (RBA) has decided to maintain its current interest rates at their historically low levels to promote growth in the region.

Governor Glenn Stevens announced today in Sydney that the target overnight cash rate will remain at 2.5%, marking the 12th month it has been in that position. According to Stevens, this will mark the beginning of a period with stable borrowing costs aimed at spurring economic growth that has so far been disappointing. He responded to concerns over the rise of inflation in the second quarter by pointing to the effect lower wage growth can have to keep inflation consistent.

The period of low rates is expected to help the central bank’s economic rebalancing to point it more towards industries such as residential construction and away from the country’s former economic driver in mining where investments have started to wind down. The RBA is under pressure from unemployment in Australia hitting 6% in June amidst lower government spending that has taken its toll on consumer confidence.

Capital Economics Asia Pte economist Daniel Martin believes that potential hikes in the interest rates are still far off in the future. He added that, “The Australian dollar is still very strong. This all comes against a backdrop of slowing mining investment, which had been the economy’s main driver in recent years.”