by Michael Witts

What were the reasons behind today's rate decision?


The RBA remains confident that past rate cuts are providing the necessary momentum for continued growth in the economy.

The RBA still views monetary policy as being accommodative.

What is the RBA's reading on the economy?

The Bank remains reasonably happy with the current conditions and outlook for the Australian economy. In particular, inflation remains contained, notwithstanding the potential inflationary impact of a lower Australian dollar.  Indeed the RBA is optimistic that inflation will be well behaved over the next few years.

What are the RBA's main concerns this month?

Once again the RBA has cited the exchange rate remaining high by historical standards. In addition the RBA noted that the stimulus to the economy from the lower exchange rate has been slightly offset due to the subsequent increase in the exchange rate over the past few months. Despite this reversal it appears clear that the RBA is expecting that the exchange rate will move lower over the period ahead.

What is the RBA's view on the global economy? What is the Board's view on China?

They are reasonably optimistic that global growth will pick up over 2014.

ING Direct agrees with this view and if anything believe that stronger world growth may surprise the markets.

What is ING Direct's outlook for Australia's economy and the Australian dollar?

At ING Direct we believe the broad economy is gaining a solid footing for further growth. The challenge for the Budget will be to achieve its fiscal objectives without derailing the broader based growth in the economy.

Interest rates will be on hold for an extended period.