Positive economic data forces RBA's hand : Reserve Bank of Australia leaves rates on hold

August 07, 2014
Sean Willett


For the 12th consecutive month, the Reserve Bank of Australia has decided to leave the official cash rate on hold. At its Board meeting earlier today, the Reserve Bank judged it was prudent to leave the cash rate on hold yet again at the historically low level of 2.5 per cent.

Today’s announcement would have failed to shock industry pundits given that the latest data to come out of the Australian market shows the economy is tracking along quite nicely. According to the latest data from the Westpac Melbourne Institute of Consumer Sentiment, confidence improved last month, climbing 1.9 per cent in July. In addition, National Australia Bank’s latest Monthly Business Survey found business confidence recorded an unexpected increase, while data from the Australian Bureau of Statistics shows retail sales enjoyed a solid lift - increasing 0.6 per cent.

This latest spate of positive data suggests consumers and businesses are starting to recover from the Federal Government’s “tough budget.” There is a lot of good news coming out of the Australian economy at the moment, which has ultimately encouraged the Reserve Bank of Australia to leave the cash rate on hold for another month.

Property prices continue to climb at a steady rate – proving property is still incredibly attractive to Australians. Recent research conducted by RP Data found dwelling values across the combined capital cities climbed 1.1 per cent higher over the last three months. Sydney and Melbourne led the charge, with dwelling values rising 2.0 per cent and 1.8 per cent respectively over the three months ending July 2014.

This strong growth has helped bolster the Australian property market as a whole, with the aggregate capital gain now sitting at 5.0 per cent for the year to date across the combined capital cities.  Broadly speaking, capital city dwelling values have trended higher since June 2012 – with the combined capital cities index recording a cumulative gain of 17.4 per cent.

Given the fact that the Australian economy and property market is currently performing well, we wouldn’t be surprised to see the Reserve Bank to leave the official cash rate on hold for another few months at least. The outlook for the economy remains strong and there is already a significant degree of monetary stimulus in place to support economic activity. As such, it now seems unlikely that the RBA will move rates in the immediate future.

If you would like learn more about your home loan or financial advice options, call Sean on 02 8084 2517 or visit www.mortgagechoice.com.au/oatley1 

Posted in: Interest rates

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