No alarms and no surprises as RBA leaves rates unchanged

03 October 2018

Interest rates have been left on hold again – sitting at their record low of 1.5 per cent for the 26th month in a row.

The decision to keep rates unchanged surprised few economists, most of which predict rates to stay put until well into 2019.

Leading economist Saul Eslake spoke to Finder’s interest rate survey about the decision.

“The RBA has made it increasingly clear that it is no hurry to start raising rates,” he said.

“Although economic growth is now running above trend, unemployment and underemployment are still higher than the RBA wants, and inflation is lower than the RBA wants – and it expects progress on both of these fronts to be only ‘gradual’.”

Most economists forecast the next move on official interest rates to be a hike, not a cut.

Reserve Bank governor Philip Lowe made the following comments in his post-meeting statement.

“The low level of interest rates is continuing to support the Australian economy,” he said.

“Wages growth remains low, although it has picked up a little.”

“The improvement in the economy should see some further lift in wages growth over time, although this is likely to be a gradual process.”

Mr Lowe’s comments suggested the RBA was unconcerned about the housing downturn in Melbourne and Sydney, saying high quality customers looking for loans could still get finance at low interest rates.

“Conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low,” he said.

“Growth in credit extended to owner-occupiers remains robust, but demand by investors has slowed noticeably as the dynamics of the housing market have changed.”

“Credit conditions are tighter than they have been for some time, although mortgage rates remain low and there is strong competition for borrowers of high-credit quality.”


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