RBA leaves rates on hold at Cup Day meeting
The Reserve Bank of Australia has left the official cash rate unchanged at 2.5%, in line with analysts’ predictions.
It is the third month in a row the Bank has left rates unchanged in a 53-year low.
The next RBA Board Meeting is on December 3.
The Bank has previously cut rates in August 2013, May 2013, December 2012, October 2012, June 2012, May 2012, November 2011 and December 2011.
RP Data’s Tim Lawless says the current rate setting is working as intended, by encouraging more buyers into the housing market, therefore stimulating new housing construction.
“Transaction numbers are close to 20% higher compared with a year ago and dwelling values across our combined capitals index have risen by 7.9% over the past twelve months,” Lawless says.
“The RBA has, on several occasions now, stated they are comfortable with the level of capital gains in the housing market; in fact the current rate of growth is well below the highs achieved over previous growth cycles and dwelling values across every capital city apart from Sydney remain below their previous peaks.”
“The improvement in housing market sentiment has flown through to improved developer sentiment as well, with the number of dwelling approvals showing a marked improvement over recent months,” he says.
“In our view, the RBA will remain vigilant on the housing market, particular the Sydney and Melbourne housing market where values are rising at a faster rate than other cities," Lawless says.
RBA governor Glenn Stevens said in his November statement that global financial conditions have remained "accommodative".
"Volatility in financial markets has abated recently. Long-term interest rates remain very low and there is ample funding available for creditworthy borrowers," Stevens said.
Nationally, he notes the economy has been growing "a bit below trend" thus far into the year. This is expected to continue as the Australian economy adjusts to the lower levels of mining investment.
In addition, he added that the pace of borrowing has remained "relatively subdued", though there have been signs of increased demand in financing for households.
"Housing and equity markets have strengthened further, trends which should in time be supportive of investment," Stevens said.
The Board judged at today's meeting that the current monetary policy is appropriate.
"The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target," he said.