Members of the Reserve Bank of Australia’s monetary policy board said that additional stimulus likely would aid the prospects for the country’s economic, minutes from the central bank’s August 2 revealed on Tuesday.
Inflation was below the target range and was expected to remain there for the foreseeable future, giving the bank the means to cut rates.
Inflation was just 1 percent in the June quarter, well below the RBA’s target band of 2-3 percent.
“Underlying inflation was expected to remain low for a time before picking up gradually as spare capacity in labor and many product markets diminished,” the minutes said.
In particular, it was weakness in the housing market that convinced the board to take action.
At the meeting, the board trimmed its benchmark lending rate by 25 basis points, to a fresh record low 1.50 percent from 1.75 percent following two months of no action.
The bank last reduced its rate by 25 basis points in May, which was the first reduction in a year.
The RBA noted the possibility that it may not be the only bank to provide stimulus.
“Monetary policy had continued to be highly accommodative in most economies and there was a reasonable likelihood of further stimulus by a number of the major central banks,” the minutes said.
Low interest rates supported domestic demand and the lower exchange rate since 2013 has helped the traded sector.
Although these factors assisted the economy to make the necessary economic adjustments, an appreciating exchange rate could complicate this, the bank noted.
“The board, on balance, judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting,” the minutes said.
Also on Tuesday, the Australian Bureau of Statistics said that the total number of new motor vehicle sales in Australia was down a seasonally adjusted 1.3 percent on month in July, coming in at 98,062.
That follows the upwardly revised 3.5 percent increase in June (originally 3.1 percent).
Individually, sales for passenger vehicles added 0.4 percent on month and sales for other vehicles fell 0.4 percent. Sales for sports utility vehicles were flat.
On a yearly basis, new motor vehicle sales were up 1.6 percent after climbing an upwardly revised 2.3 percent in the previous month (originally 2.1 percent).