Australia leaves rates steady


The Australian share market welcomed the Reserve Bank's decision to hold on any rate rise

SYDNEY, Australia (CNN) -- Australia's central bank left interest rates unchanged Wednesday, amid global volatility on the financial markets and warning signs about the strength of the U.S. economic recovery.

The Reserve Bank decision to keep the official cash rate steady at 4.75 percent for a second month was widely anticipated, with the farming sector beset by drought, a housing downturn likely and inflation contained.

Two rises in the last three months have taken interest rates from a historically low 4.25 percent to the current rate, but failed to take the heat out of a booming property market, leaving a continuing risk of overheating in an economy considered among the world's strongest.

Economists say another rate rise could potentially stem a further decline in the value of the Australian dollar, which has dropped sharply over the past few days.

SG Australia's senior strategist John Horner told Reuters news agency it would take a couple of months of stabilizing in the United States before the Reserve Bank would decide to move on its stated intention of taking rates higher.

Westpac Bank economics general manager Bill Evans went further, saying he believed the Reserve Bank would leave rates on hold for the rest of 2002, citing the sharply deteriorating growth profile in the U.S. and financial market volatility.

Figures out this month from ANZ Bank showed slowing jobs growth, with a third fall in three months in job advertisements in major newspapers.

The Australian share market welcomed the Reserve Bank's decision Wednesday adding 1.8 percent in a blue-chip led rebound in morning trade.

The top 20 stocks gained 2.5 percent on average, while the benchmark S&P/ASX200 rose 53.7 points to 3039.3 by midday as blue chips rebounded off Tuesday's calendar 2002 lows.

The RBA decision to stay its hand lifted the exchange rate of the Australian dollar from Tuesday's close of 53.83 cents to just short of 54 cents.

Reuters contributed to this report.