Stability the key according to RBA


The Reserve Bank has maintained its line of stability in its final meeting minutes for the year.

There is plenty of conjecture in terms of which way rates will go next year, but this week the RBA spoke to reinforce its opinion that the current stability in rates is appropriate for the economy. 

Last week the Reserve Bank governor Glenn Stevens said the best way to encourage consumer confidence was to promote and provide a stable economic environment. 

“In my view, over the past year or so, I have been asking myself what can we do that will be most conducive to supporting confidence, predictability, the sense that people can make some plans for their business, their own life, whatever it might be,” he said in Australian Financial Review.

“And the view I came to pretty early on was: what we should be doing is giving a message of stability and predictability insofar as we can.” 

As for this week and the Reserve’s minutes, they again stressed the importance of continued falling of the Australian dollar even though it has seen some eye-catching drops towards the end of 2014.

According to the RBA, “members agreed that further exchange rate depreciation was likely to be needed to achieve balanced growth in the economy”. 

While the RBA made comments to suggest they were open to easing the cash rate with a further cut next year, they also said that ongoing falls in the Australian dollar would make them feel more comfortable about leaving rates on hold.

The unemployment rate is another big factor in the economy right now, it has risen to 6.3 per cent nation-wide with predictions it may rise slightly more next year which could put more pressure on a rate cut. 

Commsec’s Savanth Sebastian however, told Brokernews he didn’t think this would happen. 

“If unemployment were to lift markedly then a further rate cut may take place,” he said. 

“But forward-looking labour market indicators suggest jobs growth should improve over 2015.” 

“Job ads are almost 9 per cent higher than a year ago and are now holding at 20-month highs.” 

“ In addition the lift in housing activity will continue to play a significant part in driving activity and employment over the coming year,” he said.


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