The Reserve Bank of Australia (RBA), headed by Governor Glenn Stevens, meets 11 times a year, or once every month except January, to discuss monetary policy and the use of its primary tool, the target for the “cash rate,” or the market interest rate on overnight funds, to achieve the goals defined in its charter.

This charter, drawn from the Reserve Bank Act of 1959, broadly defines the “duty” of the bank in terms of “the greatest advantage of the people of Australia.” Its three-fold mandate is as follows: the stability of the Australian dollar; the maintenance of full domestic employment; and the economic prosperity and welfare of the people of Australia.

The RBA, acting in concert with the Australian legislature, has further defined the central bank’s mission to include “inflation targeting”–i.e., the central bank estimates and makes public its projected rate of inflation, then tries to steer actual inflation toward this target via cash-rate changes, primarily, but other tools as well, such as traditional “open market” activities.

By contrast, the US Federal Reserve Open Market Committee (FOMC) meets just eight times a year. Although the central banks of many other countries, including Canada, employ inflation targeting, the Fed does not. Its own manifold mission includes price stability and full employment.

It used to be that markets awaited revelation of the target “federal funds” rate from these FOMC gatherings. In recent quarters headlines have been reserved for non-traditional methods such as “quantitative easing” and attempt to “twist” the yield curve, as the fed funds rate has been reduced as low as possible. The RBA has yet to employ such methods.

The Reserve Bank of Australia: The Traditional Methods Still Apply

On Tuesday in Australia, during the central bank’s second-to-last meeting of 2011, Governor Stevens and company decided to lower the target cash rate to 4.5 percent from 4.75 percent, responding to recent “moderation in the recent pace of global growth” by firing from a still-loaded pistol. In fact compared to the rest of the advanced world Mr. Stevens sits on a veritable armory.

Even after this 25 basis point reduction Australia still has the highest policy rate in the developed world. Before the global credit/financial/economic crisis the Australian bank had pushed its target rate to 7.25 percent, in March 2008. Lehman Brothers’ demise and the RBA’s participation in global efforts to stabilize and stimulate the world economy, helped take it to 3 percent by April 2009.

Slower growth abroad combined with the impact of a stronger Australian dollar have contained inflation, according to the central bank, after weather and other factors pushed prices higher during the first half of 2011. Preliminary data compiled by TD Securities and the Melbourne Institute and released Monday showed Australia’s consumer prices rose 2.6 percent in October from a year earlier, slowing from a 2.8 percent annual gain in September.

It’s the third straight month of slowing inflation. For the 12 months ending with October Australian inflation is running at 2.6 percent, right in the middle of the RBA’s 2 percent-to-3-percent target range.

The RBA in its statement announcing the move also noted that “fears of a major downturn have not been borne out so far.”

US gross domestic product (GDP) increased at an annual rate of 2.5 percent from the second quarter to the third quarter of 2011 according to the “advance” estimate from the US Commerce Dept’s Bureau of Economic Analysis. That’s still not nearly robust enough to absorb new entrants to the job market, let alone the millions already out of work, but it’s something clearly better than stall speed.

Preliminary Chinese purchasing managers index (PMI) data were stronger than expected, though in keeping with the slow-and-jagged global course of late the official reading disappointed. The PMI issued by the China Federation of Logistics and Purchasing and the National Bureau of Statistics fell to 50.4 from 51.2 in September.

But a figure above 50 indicates manufacturing expansion, and the official index hasn’t come in below 50 since February 2009. It’s important to note as well that this slowing corresponds with efforts by Chinese policymakers to rein in inflation. (The input prices sub-index of the official PMI data declined by 10.4 percentage points in October to 46.2, an indication that these efforts are working.)

As for the domestic situation, volatility that’s still only a pale representation of the slow and jagged story playing out in most of the advanced world leaves Australia with “moderate growth overall.” The unemployment rate, though it’s ticked up slightly is still hovering around 5 percent, compared to more than 9 percent in the US, and 7.1 percent in Canada. The flow of investment dollars into Australia’s mining and resource sectors continues to support still-strong terms of trade for Australians. According to the RBA, “Investment in the resources sector is picking up very strongly, with much more to come.” The RBA will meet again, for the final time in 2011, on Dec. 6.

A Note on Australian Withholding Tax

According to the terms of the US-Australia tax treaty–formally the Convention Between the Government of the United States of America and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income–the withholding rate on dividends paid to US-based investors by Australia-based companies is 15 percent.

The withholding rate from dividends paid by Australia-based companies to foreigners is generally 30 percent, but the US-Australia tax treaty has dealt specifically with this issue. The US-Australia tax treaty, first ratified in 1982, was most recently updated in 2001. The 1982 treaty and the 2001 Protocol are available here. Dividends are covered in Article 10.

The Roundup

Recent economic data, from many jurisdictions, indicate that things aren’t nearly as bad as bears continue to argue. But things certainly aren’t as good as last week’s astounding rally would suggest, either. Global markets shot up prematurely in response to developments in Europe, however encouraging those seemed to be in the moment. The Greek euphoria has worn off, with an Italian problem still looming.

That Europeans have gotten even this far is a notable fact. It’s just that global indexes were much more excited than the evidence warranted. For instance, though mucky-mucks reached agreement on a deal that would extend the European Financial Stability Fund, over the weekend Greek Prime Minister George Papandreou said he would take the deal to voters in his country before signing off. And then there’s Italy, which is the third-largest government debt market in the world.

Your focus as a long-term wealth-builder should be on evaluating the individual companies you own for their ability to sustain and grow their dividends. How are operating conditions? Does cash flow support the current payout as well as investment required to make sure it grows in future? Are there any short- or near-term maturities on the horizon? Is the company vulnerable to a new credit crunch? Or does it have a chance to refinance existing debt at lower rates, freeing up cash to invest in the business or distribute to shareholders?

October was among the best months ever for stock market investors. And there was more to it than the still largely intangible progress achieved on European debt, such as higher-than-expected profits.

The MSCI World Index posted its best month since January 1975, rising 13.6 percent.

The S&P 500, the most widely watched US index, climbed 10.8 percent, its biggest single-month gain since December 1991. The Standard & Poor’s/Toronto Stock Exchange Composite Index tacked on 5.4 percent, its best performance since May 2009. And the S&P/Australian Securities Exchange 200 posted a gain of 7.3 percent, its biggest rally since July 2009.

The ASX 200 was headed for its best month since 1988, however, until a return of the “risk-off” monster scared away investors on the last day of trading. Although the Australian economy clearly isn’t as slow and sluggish as the rest of the advanced world, the local stock market is certainly behaving in the same jagged way.

What matters most, however, is the continuing ability to sustain and growth dividends. During its recent annual general meeting AGL Energy Ltd (ASX: AGK, OTC: AGLNF, ADR: AGLNY) forecast underlying profit of AUD470 million to AUD500 million for fiscal 2011-12 (end Jun. 30, 2012), which would represent year-over-year growth of about 17 percent should the higher end be met. AGL posted underlying profit of AUD431.1 million in 2010-11. Management anticipates strong growth in power generation as well as stable performance in its core retail energy operation will be offset by slightly reduced windfarm development fees. Management will report interim 2012 results, for the six months ended Dec. 31, 2011, on Feb. 22, 2012. AGL Energy is a buy under USD15.30.

APA Group (ASX: APA, OTC: APAJF) is in the final stages of negotiating the refinancing of AUD900 million of syndicated facilities that are scheduled to come due in June 2012.

Management, during the company’s annual general meeting, committed to paying a dividend in 2012 “at least equal to” what it paid in 2011, or AUD0.344 per share. Operating cash flow covered the 2011 dividend by 1.5 times. Performance thus far in the first quarter of fiscal 2011-12 is “in line with…expectations and guidance.” APA affirmed the fiscal 2012 forecast it first detailed at the time of its August 2011 annual report: EBITDA within a range of AUD530 million to AUD540 million, up from AUD492 million in 2011.

This represents an 8 to 10 percent increase and includes a full year’s contribution from the Emu Downs wind farm and the Amadeus Gas Pipeline, which were both acquired in June 2011.

The company will report results for the six months ended Dec. 31, 2011, on Feb. 23, 2012. APA Group is a buy under USD4.50.

AE Portfolio Conservative Holding Australia & New Zealand Banking Group Ltd (ASX: ANZ, OTC: ANEWF, ADR: ANZBY) will report fiscal 2010-11 second-half and full-year results Nov. 3. We’ll have a full report in next week’s AEW. Australia & New Zealand Banking Group Ltd is a buy under USD22.

During the company’s Oct. 19 annual general meeting Income Portfolio Holding CSL Ltd’s (ASX: CSL, OTC: CMXHF, ADR: CHXHY) outgoing Chairman Elizabeth Alexander affirmed the company’s 10 percent growth forecast for 2011-12. The company is also nearing completion of a USD750 million private placement and a AUD750 million line of credit.

CSL is also planning to buy back up to AUD900 million of its own shares, or about 6 percent of those outstanding, over the course of the next fiscal year. CSL, an October Sector Spotlight and a recent addition to the Income Holdings, will report results for the first half of fiscal 2012 on Feb. 22, 2012. It’s a buy under USD35.

Envestra Ltd (ASX: ENV, OTC: EVSRF) forecast net profit of AUD60 million in 2011-12, a 33 percent increase from 2010-11, despite lower-than-expected volumes in the three months ended Sept. 30. Envestra plans to spend AUD200 million during the year expanding its networks and to connect over 25,000 consumers as well as to continue replacing old cast iron and steel mains. Envestra, which will report results for the six months ending Dec. 31, 2011, on Feb. 24, 2012, is a buy under USD0.75.

Telstra Corp Ltd (ASX: TLX, OTC: TTRAF, ADR: TLSYY) will participate in a Nov. 4 industry forum sponsored by the Australian Competition & Consumer Commission (ACCC) to discuss its ongoing “structural separation undertaking.” Shareholders already approved Telstra’s arrangement with the National Broadband Network (NBN) ahead of completion of the more technical aspects of its division into separate retail and wholesale businesses. Still unresolved as well is the timing of payments of the proposed AUD11 billion Telstra will receive for its copper-wire network.

Telstra will report interim 2012 results on Feb. 9, 2012. The stock is a buy under USD3.20 on the Australian Securities Exchange or using the symbol TTRAF on the US over-the-counter market. The symbol TLSYY is an American Depositary Receipt (ADR) that represents five ASX-listed shares. Buying it (under USD16) is like buying any other US stock.