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Another safe bet from the RBA today

While most of the nation was preoccupied with the events taking place at Flemington Racecourse, the Reserve Bank of Australia still met to discuss the monetary policy setting.


While most of the nation was preoccupied with the events taking place at Flemington Racecourse, the Reserve Bank of Australia still met to discuss the monetary policy setting.

In an unsurprising move, the Board opted to leave the cash rate on hold once again.

Today's decision marks the 15th consecutive month that the Reserve Bank has left the official cash rate on hold at the historically low setting of 1.5%.

The decision is not a surprise as the latest data suggests the Australian economy is performing relatively well at the moment.

Property price growth has started to slow across some markets, which is largely in line with expectations. At the same time, we have seen signs of improvement in consumer sentiment and business conditions, while unemployment remains low by historical standards.

According to the latest data from CoreLogic, there was no increase in property values across the combined capital cities over the month of October.

In fact, median dwelling values actually fell in Sydney, Darwin and Canberra last month.

In Australia's largest city, property prices slid 0.5% over the course of October, taking Sydney's median dwelling value to $905,917.

This stagnation in property price growth has been caused by the change in lending policies over the last 12 months.

For some borrowers, specifically international investors, it has become harder than ever to qualify for a home loan and this has had an impact on property demand and, in turn, property price growth.

The Reserve Bank would have been buoyed by the fact that property price growth has started to slow. Moreover, Westpac's latest consumer sentiment survey has revealed that optimists have, for the first time since November 2016, started to outnumber pessimists.

As a result, it is fair to assume that the Reserve Bank's prolong period of interest rate stability is having the desired effect on the Australian economy.

In addition to a lift in consumer optimism, we have seen an uptick in employment, with the unemployment rate now sitting at 5.5%, which is effectively full employment.

Of course, while the Reserve Bank has once again chosen to leave the cash rate on hold, that doesn't mean home loan interest rates will remain fixed at their current levels.

In recent weeks, some lenders have adjusted their fixed rate pricing and made further changes to their interest only pricing and policy.

Regardless of your circumstances, now is the right time to review your financial situation and make sure you are in the right product for your needs.

Posted in: Interest rates

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