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Australia, N.Z. leave rates on hold
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Australia and New Zealand left their benchmark interest rates on hold Wednesday, at 4.75 percent and 5.75 percent respectively. The decision by the two central banks not to move on rates was widely expected, given the continuing uncertainty about a global recovery and the impact of a drought in Australia. Still, there are countervailing factors complicating the decision for the Australian and New Zealand central banks. One is that the two economies -- which are closely linked via a special economic relations agreement -- are continuing to grow strongly. Australia expects gross domestic product (GDP) to rise by about 3.8 to 4.0 percent this year and 3.75 percent next year. New Zealand released figures last week showing GDP rose an unexpectedly strong 1.7 percent quarter-on-quarter in the three months to June, with annual average growth of 3.5 percent. (Full story) Building surgeFigures released Tuesday by the Australian Bureau of Statistics showing a recent surge in building approvals in Australia led to last-minute speculation that rates might go up to cool the housing sector. But the Reserve Bank of Australia, which met Tuesday, let the 9.30 am Wednesday window -- when it would normally make any rates announcement -- pass without comment. Analysts still expect one rise to 5 percent by the end of the year. (Full story) In Wellington, the Reserve Bank of New Zealand's new Governor, Alan Bollard, said Wednesday the bank saw "no urgency" in adjusting interest rates as the overall outlook had "evolved broadly in line with expectations". He said inflation still appeared likely to edge downwards over the next year, and the focus of monetary policy was on keeping the inflation rate securely within the mandated range. The range, agreed between the bank and N.Z. government, is a 1 to 3 percent average over the medium term. The Australian and New Zealand stock markets are both trading higher Wednesday morning, with the S&P/ASX200 up 0.85 percent to 3102.5 and the NZSE Top 40 up 1 percent to 2007.42. On the currency front, the Australian dollar is steady against the US dollar, at 54.40 U.S. cents. The New Zealand is slightly weaker at 47.35 U.S. cents.
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