RBA keeps cash rate on hold for another month
The Reserve Bank has maintained the official cash rate at 1.5% at its first meeting for the year on 7th February 2017.
This should come as no surprise to the many economic experts who predicted the decision, as the current historic low has been in place since August last year. “Amidst a lot of domestic and global uncertainty, it wasn’t surprising to see the Reserve Bank of Australia take the safe option and leave the official cash rate on hold,” states John Flavell, the CEO of Mortgage Choice.
With economic uncertainty still prevalent on both a global and national level, consumer confidence levels have remained steady since January; though these are lower than the levels of previous months during 2016.
The significant differences in housing market conditions across the country have led to increased apartment supply in the Eastern capital cities, while borrowing for houses has accelerated moderately. Capital city dwelling values rose 10.7 per cent over the past 12 months, a substantially higher growth rate than the 7.4 per cent in the prior corresponding period. Conversely, housing market movements in areas such as Perth and Darwin continue to decline, with dwelling values reducing over the last year.
Coupled with a record low for the annual inflation rate (currently at 1.5%), these factors have contributed to the Reserve Bank’s decision to keep the rate on hold for another month, in an attempt to stimulate spending and push inflation levels.
In spite of this, experts still predict an upward movement for the rate at some point over the next few months. With a few encouraging signs like a rise in resource prices, the Reserve Bank has the capacity to potentially action an upward move in the near future.
The Bank delivered “an upbeat prediction that economic growth will rebound sharply in the December quarter and hit an annual 3 per cent over coming years.” This would be the Reserve Bank’s first rate hike since November 2010.
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