INTEREST RATES ON HOLD, GROWTH RETURNS...
With spring traditionally a busy time for the real estate market and for rate moves, all eyes were on today’s Reserve Bank of Australia board meeting, where once again it was decided to leave the official cash rate unchanged.
The RBA avoided the temptation to follow other developed economies and increase rates due to continued concerns around low wages growth and the impact of rising power prices on households.
This decision marks the 13th consecutive month the RBA board has held the cash rate steady, with rates currently caught between “a rock and a hard place”, according to AMP Capital chief economist Shane Oliver.
“Strong business confidence and jobs growth, the RBA’s expectations for a growth pick up and worries about reigniting the Sydney and Melbourne property markets argue against a rate cut,” Mr Oliver said.
“But record low wages growth, low underlying inflation, the impending slowdown in housing construction, risks around the consumer and the rise in the Australian dollar argue against a rate hike, so it makes sense to leave rates on hold at 1.5 per cent, and this is likely to remain the case out to late next year at least.”
However, HSBC chief economist Paul Bloxham said the case for a hike was building and rates “should be lifted within the next six months” in response to improved corporate profitability, a pick-up in global growth and business conditions reaching decde-highs.
“While the current highly accommodative cash rate setting was needed to assist the economy to rebalance after the end of the mining boom, the mining retreat is near its end,” Mr Bloxham said.