RBA ready to cut rates, hopes not to

RBA governor Glenn Stevens. Source: Supplied

THE Reserve Bank of Australia is ready to push interest rates lower if that's what the economy needs.

But the consensus at the central bank appears to be that there's a very good chance that the economy might be able to get by without it.

The key sentence from the minutes of the RBA's monthly board meeting on April 2, released on Tuesday, was a near word-for-word repeat from all post-meeting announcements and minutes this year.

"The outlook for inflation, as currently assessed, would provide scope for further easing should that be necessary to support demand," the RBA said in the minutes.

The background to that "leave-the-door-open" stance is an economy that grew below its normal pace through most of 2012 and is expected by the RBA to do that again in 2013 before return to "trend".

But the pluses and minuses are still set for a tense struggle over the coming year or so.

"Overall, recent data suggested that interest-sensitive parts of the economy were responding to the historically low levels of rates and it remained likely that this had further to run," the RBA said.

"At the same time, the factors weighing on the economy - including the high exchange rate, the waning growth of mining investment, and fiscal consolidation - were likely to persist.

"The key issues were what the balance of these factors would turn out to be."

By keeping the cash rate steady since its last cut to three per cent in December, and by the wording of its announcements since, the RBA has made it clear that it has strong hopes that the economy can "rebalance", as some economists put it, without further monetary stimulus.

And there's no doubt the RBA would dearly like to avoid more rate cuts, and the risk of asset market distortions - like housing price booms - they bring.

If the economy fails to show continued signs that it is on track for a return to trend growth, then rates will come down and the RBA will not hesitate if that time comes.

But there's no sign right now that the RBA is in any hurry to get down off the fence.

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Cyprus 'ready to turn economy around'

THE new finance minister of cash-strapped Cyprus vowed to do "whatever it takes" to sort out the EU country's teetering finances and put the economy back on track for growth.

Haris Georgiades was speaking hours after President Nicos Anastasiades swore him in, warning of "difficult days ahead" for an island struggling to recover from a near financial meltdown and the need for a crippling eurozone bailout.

Mr Anastasiades said this would entail "firstly, collectivity and, secondly, consistency and fiscal discipline and all those measures that will contribute to kick-starting the economy as soon as possible".

The new minister, a 40-year-old British-educated economist, vowed to implement the terms of the bailout "fully... we shall meet all time frames and meet all targets".

"We... shall do whatever it takes to fix our public finances and put our economy back on track for growth."

"Even though today's circumstances might be bleak, the medium- and long-term prospects remain excellent. We have received a blow but I'm absolutely confident we shall overcome," said Mr Georgiades.

Under the terms of the bailout, Cyprus will drastically reduce the size of its bloated banking sector, raise taxes, downsize the public sector workforce and privatise some state-owned firms.

Cyprus is already in recession, with unemployment at around 15 per cent and expected to grow sharply this year and next.

Forecasts before the deal was agreed saw GDP contracting by 3.5 per cent this year.

Yesterday, outgoing finance minister Michalis Sarris said "2013 will be a very difficult year, and the beginning of 2014 will also be difficult. Beyond this I believe the prospects are positive".

Mr Georgiades, who became labour minister when Mr Anastasiades was elected in February, was appointed after Mr Sarris stepped down yesterday.

Mr Sarris had been chairman last year of failed Laiki Bank, whose collapse was a major contributor to the crisis. He said he was resigning to cooperate with a panel of judges appointed to investigate the causes of the crisis.
His departure came as the government wrapped up talks with the IMF, European Commission and European Central Bank that will open the way for Cyprus to receive a 10 billion euros ($12.36 billion) bailout.

The deal will see Cyprus receiving the loan with an interest rate of between 2.5 and 2.7 per cent, repayable over 12 years after a grace period of 10.

View the original article here

Cyprus 'ready to turn economy around'

THE new finance minister of cash-strapped Cyprus vowed to do "whatever it takes" to sort out the EU country's teetering finances and put the economy back on track for growth.

Haris Georgiades was speaking hours after President Nicos Anastasiades swore him in, warning of "difficult days ahead" for an island struggling to recover from a near financial meltdown and the need for a crippling eurozone bailout.

Mr Anastasiades said this would entail "firstly, collectivity and, secondly, consistency and fiscal discipline and all those measures that will contribute to kick-starting the economy as soon as possible".

The new minister, a 40-year-old British-educated economist, vowed to implement the terms of the bailout "fully... we shall meet all time frames and meet all targets".

"We... shall do whatever it takes to fix our public finances and put our economy back on track for growth."

"Even though today's circumstances might be bleak, the medium- and long-term prospects remain excellent. We have received a blow but I'm absolutely confident we shall overcome," said Mr Georgiades.

Under the terms of the bailout, Cyprus will drastically reduce the size of its bloated banking sector, raise taxes, downsize the public sector workforce and privatise some state-owned firms.

Cyprus is already in recession, with unemployment at around 15 per cent and expected to grow sharply this year and next.

Forecasts before the deal was agreed saw GDP contracting by 3.5 per cent this year.

Yesterday, outgoing finance minister Michalis Sarris said "2013 will be a very difficult year, and the beginning of 2014 will also be difficult. Beyond this I believe the prospects are positive".

Mr Georgiades, who became labour minister when Mr Anastasiades was elected in February, was appointed after Mr Sarris stepped down yesterday.

Mr Sarris had been chairman last year of failed Laiki Bank, whose collapse was a major contributor to the crisis. He said he was resigning to cooperate with a panel of judges appointed to investigate the causes of the crisis.
His departure came as the government wrapped up talks with the IMF, European Commission and European Central Bank that will open the way for Cyprus to receive a 10 billion euros ($12.36 billion) bailout.

The deal will see Cyprus receiving the loan with an interest rate of between 2.5 and 2.7 per cent, repayable over 12 years after a grace period of 10.

View the original article here