Australia’s central bank left interest rates unchanged at a policy meeting Tuesday, despite concerns that the resource-rich economy has slowed sharply in the second half of the year.The Reserve Bank of Australia’s benchmark rate was kept at a record low 1.5%, as expected by all 10 economists surveyed by The Wall Street Journal ahead of the decision.

“In Australia, the economy is continuing its transition following the mining investment boom,” Gov. Philip Lowe said in an accompanying statement. “Some slowing in the year-ended growth rate is likely, before it picks up again,” he added.

 

Since taking up the role in September, Mr. Lowe has stressed the need to be flexible in interpreting the central bank’s 2-3% inflation target, saying spurring more household debt growth by lowering interest rates wouldn’t be in the public interest.

The country’s big banks this week raised rates on home loans outside of any official move. They cited rising funding costs because of higher global bond yields, and regulatory curbs aimed at keeping lending to local property speculators in check.

Mr. Lowe said Tuesday that Australia’s financial institutions are in a position to lend for “worthwhile purposes.”

Australia is currently enjoying the longest ongoing expansion in the developed world—25 years and counting. Some economists predict the economy will contract in the three months through September, as weakness in mining investment and a downturn in construction drag on growth. If that happens, it would be the first negative-growth quarter since 2011 when flooding shut down coal production in Queensland state. Third-quarter growth figures are due Wednesday.

Most economists don’t expect the current lull in the economy to extend into 2017, however, given recent gains in commodity prices—especially major exports such as coal and iron ore.

Mr. Lowe said Tuesday the higher commodity prices are “providing a boost to national income,” although they remain much lower than they have been in recent years.

Source:The Wall Street Journal