Sydney, Dec. 4 (Bloomberg) -- Australia's central bank kept its benchmark interest rate unchanged for a sixth month as slowing global growth reduced exports and a worsening drought cuts crop production to 20-year lows. Reserve Bank Governor Ian Macfarlane and his board kept the overnight cash target rate at 4.75 percent, as forecast by 22 of 23 economists surveyed by Bloomberg News. The bank increased borrowing costs a quarter percentage point in May and again in June. Steady interest rates may encourage consumers to keep spending at companies such as Coles Myer Ltd., the nation's largest retailer, and David Jones Ltd. That will help the economy -- which grew 3.7 percent in the third quarter from a year earlier -- weather a drought, a slowdown in housing and weakening global growth, economists said. The rate decision ``will continue to sustain the growth the country is having -- we see it as a continuing positive,'' Warren Flick, head of department stores at Coles Myer, told reporters.
Coles Myer reported a 7.3 percent rise in sales for the quarter ended Oct. 27, and is expecting higher Christmas spending. The central bank is likely to keep interest rates unchanged until at least the second half of next year, according to the median forecast in the Bloomberg News survey of 23 economists. The bank's next interest-rate setting meeting is Feb. 4. ``Rates are on hold for the foreseeable future because of the risk to growth from a fragile global economy,'' said Tom Kenny, chief economist at Nomura Australia Ltd. Still, ``the domestic economy is showing a bit too much strength to warrant interest rate cuts.''
Central Bankers Speak
The bank doesn't release a statement explaining its decision when rates are unchanged. Bank Deputy Governor Glenn Stevens is speaking at 8 p.m., Sydney time, on inflation to an economists' dinner, and Governor Macfarlane gives his half-yearly testimony to parliament on interest rates and the economy at 9:30 a.m. Friday. Bonds gained and the currency was little changed after the decision. The Australian dollar traded at 55.94 U.S. cents at 1 p.m., Sydney time. The yield on the 6.5 percent bond maturing May 2013 fell 3 basis points after the decision to trade at 5.63 percent. That's down 10 basis points from yesterday. A basis point is 0.01 percentage point. Analysts and investors scaled back expectations of rate increases in Australia, where the economy has been growing almost 4 percent annually, because exports have been hit by the faltering global economy and drought. Two months ago, 11 of 22 economists forecast a rate increase by the end of the year.
Growth Will Slow
The gross domestic product report showed the economy expanded 0.9 percent in the third quarter from the previous three months and 3.7 percent from a year earlier. Treasurer Peter Costello said the economy ``performed exceptionally well'' in the quarter, though the drought will slow growth from here. The implied yield on the March 2003 bank-bill futures fell 4 basis points to 4.73 percent at 9:55 a.m., Sydney time. That signals investors expect rates to be kept unchanged until at least the end of the first quarter of next year. Exports make up a fifth of the economy and the outlook for growth in the U.S., which is Australia's second-largest export market, has weakened this year. An El Nino-induced drought across 70 percent of Australia has cut wheat, milk and wool production and lowered cattle prices. Australia's summer crop production will be the lowest in 20 years, the government commodity forecaster said this week. //www.quote.bloomberg.com