RBA leaves rates on hold again

The Reserve Bank of Australia has failed to shock industry pundits, with the Board opting to leave the official cash rate on hold for the 11th consecutive month.


July 01, 2014

The Reserve Bank of Australia has failed to shock industry pundits, with the Board opting to leave the official cash rate on hold for the 11th consecutive month.

At its Board meeting earlier today, the Reserve Bank announced its plans to leave the cash rate on hold at 2.5 per cent.

Mortgage Choice spokesperson Jessica Darnbrough said the RBA's decision would likely be based on the fact that consumer sentiment remains fairly sluggish and property values were stagnate over the month of June.

“According to the latest Westpac Melbourne Institute of Consumer Sentiment, confidence climbed just 0.2 per cent in June. Overall, consumer sentiment remains 6.6 per cent below the pre-Budget level recorded in April and 15.6 per cent below the post-election high recorded in November last year,” Ms Darnbrough said.

“The absence of a significant bounce in June was disappointing. Often, the initial response to a Budget can be an overreaction that reverses in the following months. However, this doesn't seem to be the case with the latest Budget. The Reserve Bank understands this and has therefore decided to leave the official cash rate on hold for another month.”

On top of sluggish consumer sentiment, Ms Darnbrough said the Reserve Bank would have also been swayed by the fact that property values have remained fairly flat over the last quarter.

“Research conducted by RP Data found property values rose by 1.4 per cent in June after posting a 1.9 per cent drop in May,” she said.

“Over the last quarter, dwelling values have remained fairly stagnate. Sydney currently leads the pack, with values climbing just 1 per cent in the capital city over the last three months. At the other end of the scale, Melbourne has endured the biggest fall in values, with the city recording a 2.4 per cent drop over the quarter.”

Moving forward, Ms Darnbrough said she expects to see the Reserve Bank of Australia leave the official cash rate on hold for some time yet.

“Given that the outlook for the economy remains relatively strong and there is already a significant degree of monetary stimulus in place to support economic activity, it seems unlikely the RBA will move rates in the immediate future,” she said.

“In fact, in the minutes of the RBA's June meeting, the board judged that the “current accommodative stance of policy was likely to be appropriate for some time yet”.”

With this in mind, Ms Darnbrough said now is a good time for potential buyers to seriously consider jumping onto the property ladder.

“Rates continue to hover around record lows. Further, some of the heat is starting to come out of the property market. So, for those who have the ability to buy, now is a really good time to do so,” she said.

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