RBA keeps rates on hold and the door ajar for possible future cuts

The RBA has kept interest rates on hold for the second successive month and they remain steady at 2 per cent.

The move to keep rates on hold was widely expected from economists, and the comments from the RBA suggest another rate cut in the future is a possibility. 

Mortgage Choice chief executive John Flavell told Broker News that property price rises of nearly 3 per cent in Melbourne and Sydney were a big factor in the decision. 

“Strong property price growth in Sydney and Melbourne combined with growing problems abroad has encouraged the Reserve Bank of Australia to leave the cash rate on hold,” Flavell said. 

“What makes this growth even more impressive is that it comes at a time when many of Australia’s lenders have started to tighten their investment lending policies. If rates were cut, property prices could climb even further – a fact the Reserve Bank is acutely aware of. “ 

“As such, it makes sense for them to leave rates on hold and hope that the changes being made by the banks to investment lending policies will be enough to help slow investor demand and property price growth in both Sydney and Melbourne.” 

Mr Flavell said the worsening situation in Greece would have also contributed to the decision after the country voted to reject Eurozone austerity measures and look like heading back to using their own currency. 

“Following Greece’s ‘no’ vote at its referendum, the Australian dollar plummeted, hitting its lowest level since 2009. With this in mind, there is no immediate reason for the Reserve Bank to cut rates.”


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