The Reserve Bank of Australia has left the official cash interest rate unchanged at 3 per cent as the economy continues to show signs of improvement, at home and abroad.
RBA governor Glenn Stevens said downside risks to the global economy had lessened over recent months, with the United States experiencing a moderate expansion and reduced financial strain in Europe.
"Around Asia generally, growth was dampened by the earlier slowing in China and the weakness in Europe, but again there are signs of stabilisation," Mr Stevens said.
"Sentiment in financial markets is much improved compared to the middle of last year."
In Australia, Mr Stevens said most indicators suggest that economic growth in Australia was close to trend, helped mainly by an increase in investment in the resources sector.
"Looking ahead, the peak in resource investment is approaching, as it does, there will be more scope for some other areas of demand to strengthen," Mr Stevens said.
"Dwelling investment appears to be slowly increasing, with higher dwelling prices and rental yields."
Mr Stevens also said natural resources exports were strengthening, while public spending was forecast to be constrained.
"The board's view is that with inflation likely to be consistent with the target, and with growth likely to be a little below trend over the coming year, an accommodative stance of monetary policy is appropriate," he said.
"The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand."
Property sector analyst RP Data’s research director, Tim Lawless, said the housing market was clearly on a recovery path, justifying the decision to keep rates on hold.
Capital city dwelling values have risen 3.3 per cent since May last year, Mr Lawless said.
“It has taken the housing market longer than normal to respond to such low mortgage rates, however it would be reasonable to assume that the RBA would be fairly comfortable with the housing market outcome to date,” he said.
The Housing Industry Association, however, said today’s decision was a missed opportunity for a struggling residential construction industry.
“Yesterday’s building approvals release from the ABS reinforced that a sustained residential construction recovery is some way off,” HIA senior economist Shane Garret said.
“What’s good for the residential construction market is good for the wider economy.
“International factors have squeezed many sectors of the Australian economy and this calls for further action from the RBA.”