Australian Rates on Hold, Current Account Deficit Widens

Marcus Jacob
02 Sep, 2014
New York City

Reserve Bank of Australia held interest rate at the level maintained since thirteen months and estimated low interest rates until next year. Australian current account deficit soared to $13.7 billion in June quarter and building approvals increased 2.5% in July on a monthly basis.

[R]5:00 PM Sydney, Australia – Reserve Bank of Australia held interest rate at the level maintained since thirteen months and estimated low interest rates until next year. Australian current account deficit soared to $13.7 billion in June quarter and building approvals increased 2.5% in July on a monthly basis.[/R]

Australian market indexes closed higher and investors digested a barrage of economic reports.

The Reserve Bank of Australia decided to maintain its record low interest rate and retained its cash rate at 2.5% as kept at the level since August 2013.

The monetary policy committee estimated interest rates are expected to stay low until next year and inflation is forecasted stay between 2% to 3% target for the next two years.

The Australian Bureau of Statistics reported the current account deficit in the second-quarter to June widened to $13.7 billion from $7.8 billion in the first-quarter.

The statistical agency said total exports in the second quarter plunged 7% while imports rose 1%.

In a separate report the bureau reported the number of building approvals in July climbed 9.4% from a year ago month. Home approvals surged 14% and other residential structures approval increased 6.3%.

On a monthly basis, building approvals in July increased 2.5% followed by 3.8% decrease in June.

The Australian Bureau of Statistics is scheduled to publish its second quarter gross domestic products data tomorrow and the GDP is expected to fall 0.4% on a sequential basis.

Australian dollar closed at 92.90 U.S. cents and in stock trading turnover increased to 611 million shares worth $3.79 billion.

ASX 200 index jumped 28.70 or 0.5% to 5,658.50 and the broader All Ordinaries index increased 27.60 to 5,656.90.

Stocks in Review

Aristocrat Leisure Limited increased 1.3% to $5.47 after the gaming solution provider agreed to sell its Aristocrat Lotteries to U.K.-based online gaming and sports betting software provider Playtech Plc for €10.5 million or about $14.8 million.

Downer EDI Limited gained 0.6% to $4.84 after the engineering construction company secured a contract for Chevron-operated Gorgon Project in Western Australia valued about $170 million.

Seven West Media Ltd slipped 1.3% to $1.84 after the diversified media company signed a long-term agreement with Magic Millions Sales Pty Ltd. for broadcasting rights of most of top sports events in Australia and rights for international events.