RBA fails to shock with latest rate decision. Official cash rate stays on hold.

September 03, 2014
Sean Willett

The Reserve Bank of Australia has erred on the side of caution once again, opting to leave the official cash rate on hold for the 13th consecutive month. At its Board meeting earlier today, the Reserve Bank announced it would leave the cash rate at the historically low setting of 2.5 per cent for yet another month.

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.

Finally, property values continue to climb, with recent research showing capital city dwelling values moved 4.2 per cent higher over the three months of winter. Sydney and Melbourne led the charge, with the capital cities recording dwelling value growth of 5 and 6.4 per cent respectively over the last three months. 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 that 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.

With that in mind, now is a great time for those with a mortgage to review their home loan and make sure they are still in the most suitable product for their needs. Similarly, if you would like to get onto the property ladder, now is a good time to do so, with rates continuing to hover around record lows and Australia’s lenders competing aggressively for business.

 

If you would like learn more about your home loan or financial advice options, call us today on 02 8084 2517. 

Posted in: Interest rates

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