The Reserve Bank of Australia today decided to keep the interest rate at its current level of 1.5 percent. This is the eighth month that the official cash rate has been maintained by the RBA amid a strong economy and growing housing market. This new decision was expected by some 50 economists who were earlier survey by Reuters.
In its board meeting, RBA Governor Philip Lowe cited the improving global economy including global trade and industrial production. China’s growth, he pointed out, is attributed to higher spending on infrastructure and property construction but the country still faces medium-term risks. The U.S., meanwhile, has increased interest rates.
Lowe added that Australia’s national income, on the other hand, is being boosted by the rise in commodity prices which has also caused inflation rates to go up in most countries. The country’s economy remains to be in a transition phase after the end of the mining investment boom. The depreciation of the exchange rate since 2013 played a role in this transition.
Employment growth is modest while unemployment rate has slightly risen. Growth in wages is still slow but there are positive indicators pointing to continued employment growth moving forward.
With regards to inflation, it remains to be very low although headline inflation is foreseen to improve this year to more than two percent.
As for the housing market, conditions vary across Australia. Some markets are showing brisk increases in prices while the others are experiencing price drops. A large supply of apartments is expected in the next two years particularly in the eastern capital cities. Rental growth, meanwhile, is at its slowest in two decades.
The major challenge for the Reserve Bank was the soaring house prices that made it impossible to raise the interest rate. Analysts say increasing the cash rate could likely affect real estate demand.
The information on this website is educational in nature. The information is offered with the understanding that the author and publisher are not engaged in rendering medical, psychological and or financial services. The information is not intended to be a substitute for professional advice nor a substitute for legal, business, financial or tax advice. This information is general advice, as each person’s
situation is different and you should consult your advisor before taking any action. The reader assumes full responsibility if using any of the information. The authors and Amalain Pty Ltd specifically disclaim any liability resulting from the use or application of this information and the reader is advised to consult their financial advisor or broker before taking any action. Before using this website and reading the content you should read our website terms and conditions.