(Bloomberg) -- Australia’s central bank stared down calls to shift to an easing bias in response to a slumping property market, maintaining that the current record-low interest rate is sufficient to drive down unemployment.

Governor Philip Lowe kept the cash rate at 1.5 percent -- as predicted by economists and money markets -- at the first board meeting of the year Tuesday, saying in a statement: “the main domestic uncertainty remains around the outlook for household spending and the effect of falling housing prices in some cities.”

The Reserve Bank has resisted resuming rate cuts after a 2-1/2 year hiatus, maintaining the cost of money is no hindrance to business investment and that strong hiring shows the economy’s underlying strength. Yet clouds have been gathering since data in early December showed a sharp slowdown in household spending, suggesting a 12 percent drop in Sydney house prices and plunging building approvals are starting to take their toll on consumers.

The Australian dollar rose, buying 72.39 U.S. cents at 2:36 p.m in Sydney, compared with 72.09 before the report.

At an international level, weaker growth in China and Europe is cooling the global economy as the threat of a U.S.-Sino trade war further aggravates the outlook. The Federal Reserve meanwhile has shelved plans for further rate increases, which is unlikely to be welcomed by an RBA that’s been relying on Fed hikes to push down the currency.

Having fallen 10 percent last year, the exchange rate has rebounded more than 2 percent in 2019. On top of that, higher funding costs have prompted banks to jack up their interest rates, despite the RBA staying on the sidelines.

But iron ore and coal prices remain strong, with the former trading at the highest in over a year, the budget is headed back to surplus for the first time in a decade and unemployment has fallen to 5 percent.

“The vacancy rate is high and there are reports of skills shortages in some areas,” Lowe said. “The stronger labor market has led to some pick-up in wages growth, which is a welcome development.”

In the key east-coast states of New South Wales and Victoria, the jobless rate is closer to 4 percent. But even there wage growth remains weak -- and inflation is nowhere to be seen. And although household debt edged down for the first time in four years, it remains near a record high.

The fear is that falling house prices will spook Australians out of spending and slash consumption, which accounts for about 60 percent of gross domestic product. Data earlier today showed retail sales suffered the biggest drop in 12 months and imports slumped by the most in almost seven years.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke

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