There were no surprises during the first meeting of the Reserve Bank under a Gillard government, with the board making the decision to leave the cash rate on hold at 4.5 per cent.
With job advertisements up 2.7% in June and unemployment figures standing at 5.2%, the Reserve Bank is expecting that Australia will enjoy a strong recovery buoyed by a powerful rise in terms of trade and a surge of investment in the resources industry. (Economists generally say that when the jobless rate reaches 5%, the nation is fully employed.)
Investment is predicted to be the key driver in Australia's growth over the next financial year. So, last Friday's announcement that the government had reached an agreement over the resource rent tax with mining companies is believed to have gone a long way to help end uncertainty in domestic markets.
In fact, Westpac chief economist Bill Evans said that the tax "was likely to encourage more rapid growth in business investment than under the RSPT (Resources Super Profits Tax) and probably more than under current arrangements."
RBA figures show commodity prices have posted their eleventh consecutive monthly rise in June, buoyed by demand from Asia. This has extended gains to 46.5% above their low point, which was May last year.
Australia's economy is expected to continue its expansion in the upcoming months. Commonwealth Bank senior economist Michael Workman has said that, thanks to Australia's positive terms of trade with Asia, the domestic economy has most likely been pushed to 3% growth over the year to June 2010 (although the figures for the June quarter haven't been released yet).
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