We expect the cash rate to be maintained at 3% throughout 2013: Commonwealth Bank

The Reserve Bank is not expected to cut the cash rate again in 2013, according to Australia’s biggest mortgage lender the Commonwealth Bank.

Following the release yesterday of weak January housing finance data – owner-occupier home loan commitments down 1.5% - Commonwealth Bank economist Diana Mousina noted there were some encouraging signs with construction lending to owner occupiers and investors rising 4.7% over the month.

“An improvement in the housing market underpins the RBA’s expectation that the non?mining economy will lift as mining investment slows down over the next two years. 

“While yesterday's data was weak overall, it was encouraging to see construction lending rise moderately,” says Mousina.

“History tells us that residential construction activity can make a significant contribution to GDP growth.

“The typical residential upturn adds around two to three percentage points to GDP growth over the average two- to three-year cycle.

“While we will need to see stronger growth in the non?mining economy over the near term, mining capex plans indicate that the slowdown in mining investment will occur gradually.

“So, the medium?term outlook for domestic growth remains quite positive. In this environment, the RBA is unlikely to cut the cash rate again. We expect the cash rate to be maintained at 3% throughout 2013,” she says.