The Reserve Bank of Australia has published its cash rate verdict, following its monthly board meeting today.
The RBA has decided to maintain the current official cash rate at its record low of 1.50 per cent. Having delivered the same result for 13 months, it is an RBA verdict that will surprise few.
The cash rate last moved in August 2016, ticking down by 25 basis points.
Mortgage Choice CEO John Flavell said he was unsurprised by the verdict, noting that the rhetoric from the RBA Board around rates supported a steady cash rate.
“In the minutes of the August Board meeting, the Board acknowledged that a prolonged period of rate stability was consistent with sustainable growth in the economy and achieving the inflation target over time.
“The Reserve Bank is forced to consider domestic and global economic factors when making their cash rate decision.”
Mr Flavell predicts that the low rates will “keep heat in the market” and property demand will remain strong.
CoreLogic head of research Tim Lawless concurred, predicting a hold verdict and adding that a cash rate hike in 2017 was unlikely. He said: “Record-high household debt remains a key concern for policymakers. Furthermore, wages growth is continually subdued.
“With the household debt to income ratio tracking at 190 per cent, households have become more sensitive than ever to the cost of debt, and the RBA will likely be very mindful of the capacity for Australian households to service their debt without a broader dent on household consumption.”
RateCity money editor Sally Tindall agreed, but argued that the RBA would like to hike rates but was not in a position to do so. “The economy is moving steadily rather than spectacularly, so the logical option is for the Board to hold fire until there are major changes in the key economic indicators.
“This means the RBA is currently playing a waiting game. They won’t want to move rates until families get some relief from the current cost-of-living pressures. With little relief in sight, they’re likely to hold off until next year."
Of brokers surveyed at HashChing, 93.62 per cent predicted a hold verdict in September, while all 33 panelists on the finder.com.au panel predicted a cash rate of 1.50 per cent and only two predicted a rate rise this year.
Economist Saul Eslake rationalised: “Inflation [is] still below target; unemployment and underemployment [are] below where the RBA wants them to be; currency [is] starting to get into 'uncomfortable' territory; (on the other hand) monetary policy already [is] highly accommodative (and [the] RBA worries about financial stability risks associated with easing further)."
While Mark Brimble from Griffith University expressed concern for a delicate economy: “The economy remains fragile and in need of some support. However, other concerns will keep the RBA on the bench for some time in relation to cash rates."
Laing+Simmons’ Leanne Pilkington was of the same mind, noting: “We think the hold pattern remains appropriate. The reasonably strong Aussie dollar, encouraging employment figures and credible results from the reporting season all point to a steady economy, leaving little impetus to tinker with the cash rate at this time."
[Related: Economic shocks ‘will occur’: RBA]