Australia leaves rates unchanged; expects Aussie to fall further.

Reserve Bank of Australia - RBA- left rates unchanged despite not a too great outlook. According to the Governor: (Excerpts)

• Growth is continuing at a below-trend pace, with domestic demand growth overall quite weak.
• Unemployment rate has gradually moved higher over the past year.
• Spare capacity.
• Growth in labour costs subdued.
• Inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate.
• Credit is recording moderate growth overall, with stronger growth in lending to investors in housing assets.
• Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months.
• Other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.
• The Australian dollar has declined noticeably against a rising US dollar, though less so against a basket of currencies. 
• It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.

Our Comments: The dollar is being talked down. There seems to be bubble coming up in the housing market. With Chinese active in this area and with China slowing, there is a real fear of an asset risk here. 

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