Low inflation and tighter credit gave room for cut, RBA minutes show

Inflation remains low in Australia as in many advanced economies and, coupled with tighter lending standards, gave room for members to vote for a rate cut, minutes of the Reserve Bank of Australia's (RBA) August meeting show.

Published today (August 16), the minutes show members observing tighter lending standards had fed through into an easing in housing price pressures and lower housing credit growth. "This suggested that the risks associated with rising household sector leverage and rapid gains in housing prices had diminished," the minutes said.

At the same time, inflation is likely to remain low "for some time", members said, and growth, while positive, is below its full potential. Taking these factors into account, the board decided to lower the policy rate by 25 basis points, to 1.5%.