RBA makes cash rate call

The Reserve Bank of Australia has announced the decision of today’s board meeting.

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 38 experts and economists from the finder.com.au RBA survey – and 97.12 per cent of the 300+ brokers surveyed by online mortgage platform HashChing – correctly predicted this outcome.

The Australian National University’s Dr John Hewson remarked that there was “no clear argument” for the RBA to lower further.

Darryl Gobbett of Baillieu Holst added: “[It’s] quite apparent that the RBA now is more concerned at future risks of increased household debt from lower rates than any, likely small, benefit to broader economic activity of lower rates. It is also now taking a longer-term view of meeting the 2 to 3 per cent inflation target.”
Further, underlying economic growth is weak, and there is still “too much exuberance” in the housing market for the RBA to cut rates, according to Richard Robinson from BIS Oxford Economics.

Mortgage Choice CEO John Flavell agreed, adding that the country’s GDP rose 1.1 per cent from the September quarter, and consumer sentiment rebounded in February.

“From this data, we can see that the Australian economy is tracking along quite nicely at the moment, so it wasn’t surprising to see the Reserve Bank opt to leave the cash rate on hold for another month,” he remarked.

However, despite today’s decision to keep the cash rate on hold, many experts and economists believe that a cash rate hike is on the horizon.

Currently, 68 per cent of panellists who opted into this question (23 of 34) think the next time the cash rate moves up will not be until 2018 or beyond.

Similarly, 69.62 per cent of brokers surveyed by HashChing believe that the cash rate has hit its lowest point in the cycle, compared to the 30.38 per cent of brokers who believe that the cash rate can go down further.

Graham Cooke, insights manager at finder.com.au says the cash rate level is likely to remain relatively consistent before starting to rise.

He commented: “With moderate improvement to the exchange rate and economic growth, the Reserve Bank has no urgent motivation to adjust rates just yet. From a macroeconomic perspective, things are ticking along well.

“Don’t wait with bated breath, as we’re likely to see a period of stability with the cash rate before it potentially starts rising either later this year or in 2018.”

RBA makes cash rate call
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