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RBA announces cash rate decision - Dec 2016

by Staff reporter6 minute read

The Reserve Bank of Australia has delivered the decision of its final monthly board meeting of the year.

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

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All 75 of the industry experts surveyed by mortgage comparison site finder.com.au predicted that there would be no change to the rate today, as many believed that there were not enough reasons to warrant the RBA to make a move.

Greater Bank’s Scott Morgan commented: “There is no imperative for the RBA to change rates at the moment. The RBA and the rest of the world is watching the United States, particularly in relation to changes in that country’s interest rates.”


Michael Witts of ING DIRECT echoed this sentiment: “The global interest rate outlook has moved sharply towards higher interest rates following the US election.

Against this background and solid domestic economy, the RBA will be on hold for an extended period.”

Mark Brimble of Griffith University said that the Reserve Bank is likely to “sit on the sidelines” for now in the hope that consumers will spend over the festive season to support the economy.

Many of the commentators believe that if the RBA is to move again, it will be next year, some say as early as its first meeting of the year in February.

CoreLogic head of research Tim Lawless agreed: “By this time the RBA will have had time to consider the performance of the housing market over the final quarter of 2016, as well as GDP figures for September and inflation numbers for the December quarter.”

“Additionally, there will be further clarity on the US economy where unemployment has reached a nine-year low and interest rates are about to start ratcheting higher,” he concluded.

In terms of the property market, Mr Lawless added that a decision to cut the cash rate to new record lows could add fuel to housing activity among investors and owner occupiers, which could in turn “push housing values even higher” next year.

Speaking on behalf of Mortgage Choice, CEO John Flavell concurred with a potential rise next year, saying: “When you look at the latest economic data, there was no reason for the Reserve Bank to change its current stance on monetary policy…

“But while the Reserve Bank decided to leave the cash rate on hold in December, it is likely that future rate increases are just around the corner.”

Mr Flavell explained: “There is growing speculation that the United States’ Federal Reserve will lift the official cash rate at its next board meeting on December 14. If this happens, we could see the Reserve Bank follow suit and lift rates as early as February 2017.

“Increases in long-term bond rates further support the theory that interest rates could soon rise. If people have been waiting for the bottom of the rate cycle, it may well have already passed.”

Of the brokers surveyed by HashChing, 89.47 per cent correctly predicted that the RBA would keep the rate on hold today.

RBA announces cash rate decision - Dec 2016
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James Mitchell

James Mitchell


James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.


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