The Reserve Bank of Australia has erred on the side of caution once again, opting to leave the official cash rate on hold at 2.5% for the 13th consecutive month.
At Mortgage Choice East Perth we beleive the Reserve Bank’s decision to leave the cash rate on hold was an obvious one as recent data shows the Australian economy is currently tracking along quite nicely.
Consumer confidence has started to bounce back, with data from the Westpac Melbourne Institute of Consumer Sentiment showing confidence climbed 3.8 in August to sit just 1.2 per cent below the pre-Budget reading.
In addition, business confidence improved, reverting to its post-elections highs, while business conditions rose to their highest level since early 2010.
Property values also continue to climb, with recent research showing capital city dwelling values moved 4.2 per cent higher over the three months of winter.
At Mortgage Choice East Perth we beleive this spate of positive data suggests the economy is in good shape – providing the Reserve Bank with no impetus to change its current monetary policy setting.
Moving forward, it is likely the Reserve Bank will continue to leave rates on hold. While new data emerging suggests the Australian economy is performing strongly, the high Australian dollar and rising unemployment woes will force the Board to take a ‘wait and see’ approach to rates.
Further, the Reserve Bank has made it abundantly clear that they are happy with the current monetary policy setting and while there is a significant degree of uncertainty about the outlook – given the number of forces working in different directions – the most prudent course of action is likely to be a period of interest rate stability.
If you would like to find out more feel free to contact Peter Hale at email@example.com, or call 0402 252 150.