Australia keeps rates steady at 4.75pc

SYDNEY: Australia held official interest rates steady at 4.75 percent Tuesday, saying floods and cyclones had thrown the economy into reverse and Europe remained plagued by debt fears.

The Reserve Bank of Australia left the official cash rate unchanged for the sixth consecutive time after data last week showed the heaviest economic contraction in 20 years due to the summer's natural disasters.

Central bank governor Glenn Stevens said there had been a "sharp" 1.2 percent on-quarter fall in output in the first three months of 2011, with "resumption of coal production in flooded mines taking longer than initially expected."

Globally, Stevens said very high commodity prices were weighing on income and demand in major economies and elevating inflation.

"Uncertainty over the prospects for resolution of the banking and sovereign debt problems in Europe has increased over the past couple of months, which has been adding to financial market volatility," he added.

Employment growth in Australia had slowed and was likely to remain lower in the near term, while consumers were saving rather than spending and Australia's bullish dollar remained "close to its highest level in several decades".

"If sustained, this could be expected to exert continued restraint on the traded sector," said Stevens.

The Australian dollar slipped from US$1.0740 before the decision to $1.0694 soon after the decision.

Copyright AFP (Agence France-Presse), 2011