/www.bloomberg.com/ By Victoria Batchelor
Sydney, Nov. 6 (Bloomberg) -- Australia's central bank kept its benchmark interest rate unchanged for a fifth month as evidence mounts a global economic slowdown is crimping exports and a drought is cutting farm production.
Bank Governor Ian Macfarlane and his board kept the overnight cash target rate at 4.75 percent, as 22 economists surveyed by Bloomberg News forecast. Most economists expect the bank will keep borrowing costs on hold until the second quarter of next year even as the economy grows about 4 percent annually.
That's because the global slowdown is reducing demand for exports and cutting profits at companies such as M.I.M. Holdings Ltd. and BHP Billiton, the world's largest miner. A worsening drought is expected to cost Australia about A$5.4 billion ($3 billion) this year, the government commodity forecaster said last week.
``The renewed deterioration in international economic conditions has combined with the drought to keep the Reserve Bank on hold,'' said Tony Meer, senior economist at Deutsche Bank AG in Sydney.
``We now expect the cash rate to remain at 4.75 percent for the next 12 months, and there's a possibility the next move by the bank may be a cut.''
The decision comes a day before the U.S. Federal Reserve is expected to lower its benchmark lending rate. The U.S. is the second- largest buyer of Australian goods and services
A Bloomberg survey of 133 economists shows 71 expect the Federal Reserve to cut the overnight rate by a quarter percentage point to 1.5 percent, the lowest since July 1961. Seventeen expect a half- point cut.
`Australia in Contrast'
The Bank of England and the European Central Bank also are likely to cut rates before the end of the year, economists said.
Still, ``Australia is under no pressure to cut rates,'' said Tony Pearson, global head of market economics at National Australia Bank Ltd. ``The Australian economy continues to provide a marked contrast to most of the rest of the world with its ongoing strength.''
Australian bonds and the dollar were little changed after the decision. The yield on the May 2013 bond was unchanged at 5.63 percent at 11 a.m., Sydney time. The dollar was unchanged at 56.09 U.S. cents.
The central bank raised its benchmark rate a quarter point in May and again in June to help cool a housing boom that helped the economy grow 3.8 percent in the year ended June 30.
It doesn't release a commentary explaining its decision when rates are unchanged, though Governor Macfarlane will give a speech on monetary policy in Melbourne next Wednesday.
`Right Decision'
``It was the right decision to take,'' Prime Minister John Howard told Adelaide radio station 5DN. ``The international economy is a little weak and we have the economic effect of the drought beginning to be felt around the country.''
Fewer than half of the economists surveyed expect a rate rise before the end of March. A month ago, the median forecast was for an increase by the end of the year.
``We are vulnerable to the effects of negative world events,'' John Symond, managing director of Aussie Home Loans Ltd., Australia's largest non-bank lender, said in an interview. ``I can't see any rate increase well and truly into next year.''
Among other companies seeing signs of a slowing in the economy, John Fairfax Holdings Ltd. Chief Executive Fred Hilmer said the Australian advertising market is at its worst in more than two decades. Fairfax is the second-biggest newspaper publisher in Australia.
``The decline in some advertising markets is almost entirely due to declines in some sectors of the economy,'' Hilmer said. Employment advertising had fallen, while real estate and automotive advertising had risen, he said.
Melbourne-based BHP Billiton said last week its first-quarter profit dropped 9 percent to $553 million as it cut copper output because of weak demand. The company said it doesn't expect an improvement this quarter.
Meantime, an El Nino-induced drought has spread across almost a third of Australia, with some parts of the country recording the lowest winter rainfall since 1900.