Reserve Bank announces cash rate decision

All 12 economists surveyed by comparison website finder.com.au had expected the cash rate to remain unchanged.

Mortgage Choice spokesperson Jessica Darnbrough said the Reserve Bank’s decision would have been influenced by recent positive news on inflation and unemployment.

The inflation rate of 2.9 per cent is within the target range of 2 to 3 per cent, while unemployment fell in March from 6 per cent to 5.8 per cent.

“This drop suggests the Australian economy is in pretty good shape at the moment, so there is no urgent need for the Reserve Bank to play around with its current monetary policy setting,” she said.

RP Data national research director Tim Lawless said the Reserve Bank would have drawn comfort from a recent cooling in the housing market following strong growth since June 2012.

“The April results showed a slowdown in dwelling value appreciation, up just 0.3 per cent over the month, which is likely to be a welcome result after such previously strong conditions,” he said.”

Economists generally expect the next move in rates to be upward – but the 12 experts surveyed by finder.com.au are unsure when that will happen.

Five economists from AMP Bank, Commonwealth Bank, HSBC, NAB and St George forecast that the cash rate would rise later this year.

Three economists from ANZ, Bank of Sydney and RAMS said they did not expect rates to move until 2015.

Four economists from Aussie Home Loans, ING Direct, Property Observer and Resi were unsure when rates would move next.

The Reserve Bank revealed in the minutes for last month’s meeting that the official cash rate was likely to remain at 2.5 per cent for “some time”.

“At recent meetings, the board had judged that it was prudent to leave the cash rate unchanged and members noted that the cash rate could remain at its current level for some time if the economy was to evolve broadly as expected,” the April minutes said.

Loan Market director Mark De Martino said Australia could go a full year without a rate movement, with this being the ninth consecutive month the cash rate has been at 2.5 per cent.

“The RBA has made it clear the high Australian dollar is negating some of the pressures to move rates upwards and it’s unlikely we’ll see a rate move in the next few months,” he said.

“The combination of historically low interest rates and rate stability are helping homeowners and buyers build confidence in the property market.”