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Cash Rate On Hold

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The Reserve Bank has left the official cash rate at 0.75%, following its monthly board meeting last week. Chief Executive Officer of Mortgage Choice, Susan Mitchell says: “In the final monetary policy meeting for the year, the Reserve Bank board decided to hold the official cash rate, following a recent run of lacklustre economic data.

“In the minutes of the November monetary policy meeting, Reserve Bank board members agreed that a case could be made for further easing of monetary policy, however, a wait-and-see approach would allow them to monitor the effects of previous cash rate cuts.”

“There are further signs of a turnaround in established housing markets. This is especially so in Sydney and Melbourne, but prices in some other markets have also increased recently. In contrast, new dwelling activity is still declining and growth in housing credit remains low. Demand for credit by investors is subdued and credit conditions, especially for small and medium-sized businesses, remain tight. Mortgage rates are at record lows and there is strong competition for borrowers of high credit quality.”

“The easing of monetary policy this year is supporting employment and income growth in Australia and a return of inflation to the medium-term target range. The lower cash rate has put downward pressure on the exchange rate, which is supporting activity across a range of industries. It has also boosted asset prices, which in time should lead to increased spending, including on residential construction. Lower mortgage loan rates are also boosting aggregate household disposable income, which, in time, will boost household spending.”

Before the meeting, Reserve Bank governor Philip Lowe said: “Conventional monetary policy is still working in Australia and we see the evidence of this in the exchange rate, in asset prices and the boost to aggregate household disposable income”. Research by Finder shows leading economists and commentators don’t expect another reduction to the official interest rate until February or May 2020.


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