Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
SUBSCRIBE TO OUR NEWSLETTER SIGN UP
Powered by MOMENTUM MEDIA

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

RBA delivers cash rate verdict

rba logo

rba logo
Lucy Dean 2 minute read

The Reserve Bank of Australia has announced the official cash rate for September, following its monthly board meeting.

The RBA has decided to maintain the current official cash rate at its record low of 1.50 per cent. Having delivered the same result for 13 months, it is an RBA verdict that will surprise few.

The cash rate last moved in August 2016, ticking down by 25 basis points.

Mortgage Choice CEO John Flavell said that he was unsurprised by the verdict, noting that the rhetoric from the RBA board around rates supported a steady rate.

Mr Flavell said: “In the minutes of the August board meeting, the Board acknowledged that a prolonged period of rate stability was consistent with sustainable growth in the economy and achieving the inflation target over time.

“The Reserve Bank is forced to consider domestic and global economic factors when making their cash rate decision.”

Mr Flavell predicts that the low rates will “keep heat in the market” and property demand will remain strong.

CoreLogic head of research Tim Lawless concurred, predicting a hold verdict and adding that a cash rate hike in 2017 is unlikely. He said: “Record-high household debt remains a key concern for policymakers. Furthermore, wages growth is continually subdued.

Advertisement
Advertisement

“With the household debt to income ratio tracking at 190 per cent, households have become more sensitive than ever to the cost of debt, and the RBA will likely be very mindful of the capacity for Australian households to service their debt without a broader dent on household consumption.”

RateCity money editor Sally Tindall agreed, but argued that the RBA would like to hike rates but was not in a position to do so. “The economy is moving steadily rather than spectacularly, so the logical option is for the Board to hold fire until there are major changes in the key economic indicators.

“This means the RBA is currently playing a waiting game. They won’t want to move rates until families get some relief from the current cost-of-living pressures. With little relief in sight, they’re likely to hold off until next year."

Of brokers surveyed at HashChing, 93.62 per cent predicted a hold verdict in September, while all 33 panelists on the finder.com.au panel predicted a cash rate of 1.50 per cent and only two predicted a rate rise this year.

Jordan Eliseo from ABC Bullion said: “​Latest economic data released, including today’s CAPEX results, will give the Board confidence that the economy is stabilising and set to continue on its trajectory of steady, if not spectacular, growth. As a result, they'll be confident that they have the appropriate monetary policy in place for now."

PROMOTED FEATURES


Shane Oliver from AMP Capital added: ​"The RBA and rates are stuck between a rock and hard place — solid business conditions and labour market indicators along with the RBA's expectations for strong growth argue against a rate cut, but subpar growth at present, risks around consumer spending, low wages growth and inflation and the rise in the $A argue against a rate hike."

Dr Andrew Wilson from Domain Group was one of the two panelists to predict a rate hike before Christmas, noting that the RBA is “maintaining an optimistic medium-term view of the economy”.

Noel Whittaker from QUT was the other. He said: "I don't think they are ready to lift yet — but they will be thinking about it."

[Related: RBA signals positive business sector outlook]

RBA delivers cash rate verdict
rba logo
TheAdviser logo
rba logo

 

more from the adviser
house coins ta Aussie reports record spike in pre-approvals

The major brokerage has reported a record increase in home loan p...

Money jar Facebook launches SME grants program

The social media giant has commenced processing applications for ...

uptick Aggregator reports surge in settlements

Purple Circle Financial Services has reported a record increase i...

FROM THE WEB