Homeowners and business can breathe a collective sigh of relief after the Reserve Bank left the official cash rate unchanged following its monthly board meeting today.
The decision to leave the rate at 4.50 per cent after three consecutive monthly increases, and a total of six since October, was widely expected by economists.
Bank governor Glenn Stevens said taking all the available information into account, the board viewed the current setting of monetary policy as "appropriate for the near term".
But he warned that inflation appears likely to be in the upper half of the two to three per cent target zone during the next year.
The high level of the terms of trade was expected to add to incomes and demand, he said, adding economic growth over the year ahead was likely to be about trend. Interest rates to borrowers were around their average levels of the past decade, Mr Stevens said.
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"Which is a significant adjustment from the very expansionary settings reached a year ago."
The governor noted concerns about sovereign creditworthiness in several European countries since the May board meeting, which had been the focus of financial markets.
"The effects of these various factors on the world economy will need to remain under review," he said.
"At this stage, global growth is still expected to be at about trend pace in 2010."
Treasurer Wayne Swan welcomed the decision to leave the cash rate unchanged.
"This news will be welcome relief to Australian families and businesses around the country, who are of course doing it tough," Mr Swan told parliament minutes after the decision was announced.
