RBA holds interest rates at November Cup Day meeting

The Reserve Bank have decided to leave the cash rate on hold at a historic low 0.75 per cent.

It noted a further turnaround in established housing, particularly in Sydney and Melbourne.

The decision comes after a month of some positive news for the Reserve Bank, namely in unemployment which dropped back to 5.2 per cent.

Last weeks slight inflation uptick was further good news for the RBA.

CoreLogic's head of research Tim Lawless said the decision to hold rates was widely anticipated given the RBA is running out of conventional monetary policy ammunition.

"The decision to keep rates on hold was supported by the latest labour market and inflation readings, which saw the national unemployment rate nudge lower, while annual headline inflation edged slightly higher," Lawless said.

"Additionally, a rebound in housing values and a rise in buyer activity will hopefully begin to flow through to a gradual improvement in household wealth and spending. 

Lawless suggested the RBA will be carefully monitoring other indicators which have continued to lose momentum such as consumer confidence, residential construction activity and retail spending. 

"One of the negative side-effects of such historically low interest rates is that Australian households and businesses are reading through the low rate setting and becoming less confident about their household finances and the outlook for the economy, which is offsetting some of the stimulatory benefits of historically low interest rates. 

"Although the cash rate has remained on hold, lenders are becoming increasingly competitive, particularly for high quality borrowers – ie those with low debt relative to their incomes and a responsible track record of savings together with expenses that are in line with their incomes. 

"No doubt the lowest mortgage rates since at least the 1950’s and improved access to credit following APRA’s decision to adjust the interest rate serviceability floor are contributing to a rebound in housing market conditions. 

"While the improved housing market conditions are a positive for broader economic conditions, an increase in speculative activity from property investors or a slip in the quality of lending standards could be the trigger for a new round of macro-prudential policies aimed at maintaining prudent lending standards and keeping a lid on further accrual of housing related debt.

Finder.com.au's RBA Cash Rate Survey saw all of its 38 experts predict a rate hold at today's meeting, however two thirds of the experts surveyed believed the cash rate will drop to 0.5 per cent in February 2020.

Only 21 per cent think there will be a cut in December.

Sally Tindall, research director at RateCity, says that despite there being no movement this month, another rate cut is still very much on the cards for the future: 

"When you look at the big 4 banks, on average their 3-year fixed rates are a quarter of a percent lower than their lowest variable rates, which is a strong indication the cash rate will continue to fall," Tindall said.

"In fact, the market is expecting rates will remain low for very long time. Five year fixed rates have hit an all time low of 2.74% while variable rates are as low as 2.69%.

"But these rates are reserved for new customers so if you want to take advantage of this, you might have to turn yourself from an existing customer into a new one."

Shane Oliver, chief economist at AMP Capital, says the are still expecting an easing in December and February.

"With growth likely to remain subdued and the econ a long way from full employment further easing is needed," Oliver tweeted.

"So in the absence of significant fiscal stimulus soon we still expect another easing in Dec & Feb."