* RBA keeps cash rate at 4.75 pct as expected
* Talks of terms of trade and investment, cautious consumer
* Market pricing in one hike over 12 months, analysts more
By Wayne Cole
SYDNEY, Dec 7 (Reuters) - Australia's central bank kept its key cash rate unchanged at 4.75 percent on Tuesday, a widely expected decision following a pre-emptive hike last month, and is thought likely to remain on hold for a few months to come.
The Australian dollar barely budged after the Reserve Bank of Australia (RBA) ended its monthly policy meeting with a brief and balanced statement which offered scant guidance on when rates might rise again.
"Following the Board's decision last month to lift the cash rate, and the subsequent increases by financial institutions, lending rates in the economy are now a little above average," wrote RBA Governor Glenn Stevens.
"The Board views this setting of monetary policy as appropriate for the economic outlook."
Investors had priced in <0#YIB:> absolutely no chance of a hike as Stevens had made it clear the market was reasonable to assume the next hike might not come until the middle of 2011.
The central bank last lifted rates by 25 basis points to 4.75 percent in November, billing it as a pre-emptive strike against future inflation. That brought its tightening to 175 basis points in 13 months, easily the boldest action of any developed nation.
A Reuters poll of 21 analysts had found all expected rates to stay at 4.75 pct on Tuesday, with the next hike likely coming sometime in the second quarter of 2011. The RBA does not meet in January, so the next window on rates will be its Feb. 1 meeting.
Investors are pricing in a more leisurely pace of just 26 basis points of hikes in 12 months , in part reflecting moves by commercial banks to lift mortgage rates by more than the rise in the cash rate.
Domestic economic news has also turned patchy with gross domestic product (GDP) rising a pedestrian 0.2 percent in the third quarter, while retail sales slumped 1 percent in October as households chose to save more.
ALL ABOUT TRADE
Yet the central bank has actually been counting on household consumption to stay subdued to leave room for mining to boom without creating inflation.
The RBA has been confident that growth will accelerate as Asian demand for Australia's resources drives a huge rise in the terms of trade, or the ratio of export to import prices.
Stevens recently estimated that the once-in-a-century lift in the terms of trade was worth a staggering 12 to 15 percent of GDP every year it lasted.
And he expects it to last a long time as the urbanisation and industrialisation of over two billion people in China and India promises to boost commodity demand for decades to come.
This flood of cash from trade is boosting profits, wages, employment and tax receipts, while fuelling the biggest business investment boom in Australian history. A government survey out last month showed firms planned to spend A$129 billion in 2010/11 alone, or 10 percent of GDP.
Such is the rush that some of this investment will likely be delayed or suffer significant cost overruns, but even then the lift to the economy should be substantial.
Perhaps the most tangible sign of all this good fortune has been the creation of over 300,000 new jobs so far this year, a remarkable run for a country with just 22.5 million people.
Even the farm sector is chipping in as good rains have lifted the estimate for winter crops by 22 percent to 43.2 million tonnes, while the summer crop is seen rising 60 percent.
The jobless rate is already down to 5.4 pct and is expected to drop under 5 percent next year, lows that have led to inflation in the past.
"The RBA sounds fairly comfortable with where things are and where the economy is heading, suggesting no great need to rush in with another rate rise," concluded Michael Blythe, chief economist at Commonwealth Bank.
"But with the terms of trade, national income growing strongly, wages growth to pick up further ... that still suggest higher rates sometime in the first half of next year." (Editing by Balazs Koranyi)