Reserve Bank of Australia sees stabilization

The Reserve Bank of Australia (RBA) left its cash rate unchanged at a record low of 3% as expected. The RBA noted in its statement that evidence has continued to emerge that the global economy is stabilizing, after a sharp contraction during the December and March quarters.

Australia's central bank remarked that considerable policy stimulus in most countries is helping to contain the downturn, and should support an eventual recovery.

The turnaround is "clearest in China" and some emerging countries, the RBA said, but a recovery in the major countries is likely to take longer to begin and be slower when it does occur. Australia also indicated that credit remains tight and confidence is fragile but prospects are being helped by better conditions in global financial markets.

Monetary policy has been eased "significantly but the RBA did not rule out further rate cuts.

Central bankers in Australia have cut interest rates by 425 basis points (4.25 percentage points) since September in order to mitigate the impact of the global downturn. The country is dependent on commodities, and subsequently, has not been immune from the steep downturn in prices following over 15 years of an expanding economy.

The RBA also helped to confirm that China's economy is displaying signs of leading Asia out of the nastiest recession in decades. Australia has forged closer economic ties with China, which has been devouring much of the world's commodities in recent years.