Australia holds rate amid revival in home market

Australia's central bank kept its cash rate at a record low of 2.5 per cent yesterday as a report showed past interest rate reductions had lifted home prices to historic highs, although there was little guidance on the chance of further cuts.

The Australian dollar jumped in response as many in the market had expected a more dovish tone from the Reserve Bank of Australia (RBA) after its monthly policy meeting. Instead, the central bank stayed mum on the outlook.

"The board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target," RBA governor Glenn Stevens said.

Some had thought the RBA might specifically refer to there being scope to ease again if necessary, and reacted by slightly paring the chances of another rate cut in coming months.

Then again, minutes of the central bank's September meeting showed the board did not want to close off the possibility of further cuts, but neither did it want to signal an imminent intention to ease.

The RBA cut rates in May and August in large part because a long boom in mining investment had peaked and spending by other sectors had yet to fill the gap.

There are signs that low mortgage rates are reviving the housing market. Approvals to build new homes grew 28 per cent in the year to July.