The longest-serving Chairman of the US Federal Reserve (from 1951 to 1970), William McChesney Martin, Jr, once observed that the role of the Federal Reserve – the equivalent of our Reserve Bank of Australia (RBA) – is “to take away the punch bowl just as the party gets going”.

By leaving interest rates on hold today, and going against the weight of market opinion, the RBA has signalled it isn’t sure the party has started yet in the Australian economy.

This is a wise decision and good news for the Queensland economy, given the latest building approvals data from last week show the outlook for Queensland’s construction sector remains pretty ordinary.

In addition to its likely concerns over the state of the Australian economy, the RBA Board is probably worried about the ongoing weakness of the US economy, which has remained in an economic slump since late-2007.  The International Monetary Fund (IMF) is pessimistic about the prospects for recovery in the US (and Europe, too):

IMF admits that the West is stuck in near depression

While the US is no longer the sole engine of global economic growth, it remains the world’s largest economy, and a prolonged economic slump in the US contains risks for growth in China, which exports a lot of manufactured goods to the US.

Clearly it’s wise for the RBA to tread carefully.