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RBA delivers cash rate announcement - Feb 2017

by Francesca Krakue11 minute read
RBA delivers cash rate announcement - Feb 2017

The Reserve Bank of Australia has revealed the decision of its first monthly board meeting of the year.

In what was a widely-anticipated result, the RBA today decided to keep the official cash rate on hold at its record low of 1.50 per cent.

As today’s meeting approached, all 32 experts and economists from the finder.com.au RBA survey – and 85.94 per cent of the 300 brokers surveyed by online mortgage platform HashChing – correctly predicted this outcome.

A strong Australian dollar, subdued inflation, and a low gross domestic product (GDP) figure for September 2016 have meant the board is waiting for stronger indications of the country’s economic performance before shifting the rate.

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ABC Bullion chief economist Jordan Eliseo elaborated: “The RBA is likely to sit tight for a month or two, analysing all incoming data before they make their next move.”

Mortgage Choice CEO John Flavell agreed, saying: “Data from the ABS found the December quarter inflation result was just 0.5 per cent while the yearly price growth was just 1.50 per cent – far below the Reserve Bank’s 2 per cent to 3 per cent target range. All of these factors combined gave the RBA all the incentive it needed to leave the official cash rate on hold for another month.”

Richard Robinson of BIS Shrapnel added that the RBA is reluctant to lower the rate because a cut would give “a further unwelcome boost” to Sydney and Melbourne’s housing markets.

Of the 26 industry pundits who weighed in on the topic of property oversupply, 77 per cent believe there’s an oversupply of apartments in some of Australia’s capital cities.

The majority of these experts (75 per cent) believe Melbourne has the highest incidence of apartment oversupply, followed by Brisbane (70 per cent), Sydney (40 per cent) and Perth (35 per cent).

The cash rate has hit its lowest point this cycle, according to the majority of the experts surveyed by finder.com.au (58 per cent).

The comparison website’s insights manager Graham Cooke commented: “In the past few months, there’s been an increasing sentiment towards a cash rate lift. But don’t hold your breath as the upward move is potentially months away.”

Of the 300 brokers surveyed by online mortgage platform HashChing, 65.45 per cent believe that rates will rise in 2017.

Meanwhile, industry super fund-owned bank ME today said that low income growth and low job availability combined with high levels of job insecurity and underemployment mean the RBA may still cut official rates later this year.

“The Australian economy continues to exhibit a number of both cyclical and structural challenges mainly related to the labour market and so the non-consensus case for further official rate cuts bears close monitoring,” an ME spokesperson said.

[Related: Investor rates rise ahead of RBA meeting]

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