Australian Rate on Hold; Export Surplus Increase to A$2.3 Billion

Marcus Jacob
05 Jul, 2011
New York City

Australian stocks traded lower after the Reserve Bank of Australia left its key lending rate at 4.75% and offered a benign view on inflation. The rate decision was widely anticipated but the outlook on inflation prompted a slower economic expansion outlook for the rest of the year.

[R]5:00 Sydney – Australian stocks traded lower after the Reserve Bank of Australia left its key lending rate at 4.75% and offered a benign view on inflation. The rate decision was widely anticipated but the outlook on inflation prompted a slower economic expansion outlook for the rest of the year.[/R]

The Reserve Bank of Australia left its key interest rate unchanged at 4.75% and indicated inflation to be “close to the target for the next twelve months.”

The rate decision was widely anticipated but the outlook on inflation was weaker than predicted by most economists.

The RBA also noted that general economy outside the mining industry is weaker and the impacts of the recent floods in Queensland on the mining industry were higher than anticipated.

The rate setting committee decided to pursue “mildly restrictive” policy and leave the rate unchanged till the next meeting in August.

Economists also noted that the central bank has lowered its view on the inflation from its recent hawkish statements and the latest view may lead to lower economic growth estimates for the year.

The ASX 200 index decreased 12.60 or 0.3% to 4,610.7 and All Ordinaries index declined 0.3% or 13.50 to 4,656.90.

In trading, 1.82 billion shares worth $3.96 billion changed hands and 525 stocks increased, 524 decreased and 354 were unchanged.

The Australian dollar decreased 0.4% to US$1.0698.

The Australian Bureau of Statistics said trade surplus in May increased to $2.33 billion from 1.62 billion in April on the rise in exports of gold, coke and coal. However, the underlying exports data were mixed. Coal exports on a monthly basis increased 2.7% but iron ore shipments decreased 2.8%.

Stock Movers

BHP Billiton increased 21 cents to $44.23 and Rio Tinto added 17 cents to $83.32.

Banks closed lower after the Reserve Bank of Australia left its rate unchanged at 4.75%.

National Australia Bank declined 28 cents to $25.14, Commonwealth Bank decreased 28 cents to $51.78, Westpac fell 5 cents to $21.97 and ANZ eased 1 cent to $21.93. Bank of But, Queensland added 13 cents to $8.45.

Macquarie Radio Network decreased 4 cents to $1.26 and the company inched towards acquiring eight Queensland radio licenses from Smart Radio Network.

Qantas increased 5 cents to $2.02 and Virgin Blue closed unchanged at 31.5 cents after Tiger Airways was grounded for the second day.

Treasury Wine Estate decreased 8 cents to $3.59 a day after it was the subject of Chinese takeover speculation.