Positive data gives RBA no reason to move rates

April 01, 2014
Owen McDonald

Better than expected job figures and solid housing finance data combined with stronger household spending has encouraged the Reserve Bank to leave the official cash rate on hold again. This is the eighth consecutive month that the Reserve Bank has left the cash rate on hold at 2.5%. 

The Board’s decision would have failed to surprise homeowners, given that the Australian economy continues to track along quite nicely. More than 47,000 jobs were added to the economy in February – the strongest monthly rise in almost two years. Further, the participation rate jumped to 64.8% from 64.6%. On top of the strong job data, dwelling finance commitments continue to hover around four year highs, with loans to finance the construction of new homes enjoying a 5.8% surge in January, according to data from the Australian Bureau of Statistics.

In addition to the solid housing finance data household spending enjoyed a significant jump in January. Data from the Australian Bureau of Statistics shows retail sales jumped 1.2% in January, including strong growth for department stores and clothing retailers. The surge in sales greatly exceeded analyst expectations, with a majority predicting a rise of 0.4%. Specialty food retailers enjoyed the biggest surge, growing 3.1% in January.

With all of this positive data it really isn’t surprising to see the Reserve Bank leave the cash rate on hold. In fact, the RBA is now widely expected to leave the cash rate on hold for the foreseeable future.

With that in mind now is a good time for potential home buyers to jump onto the property ladder and capitalise on the positive market conditions.  Not only are rates low, but lenders are aggressively competing for business at the moment. As such, if you have the ability to buy, now may be a good time to do so, because you should be able to negotiate an excellent rate. On the flipside, if you have already bought, now is a good time to review your current situation and see if there is a better deal out there for your needs.

Posted in: Interest rates

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