RBA treads most likely path in November: HIA's Harley Dale

RBA treads most likely path in November: HIA's Harley Dale
RBA treads most likely path in November: HIA's Harley Dale

Despite some growing conjecture around an imminent rate cut, the board of the Reserve Bank of Australia today decided to keep the official cash rate at 2.00%.

There was some risk that the RBA cut the cash rate today, but financial institutions may then have failed to pass the full cut on to mortgage and business borrowers.

That would have been perceived as a double hit by mortgage holders who have just experienced a hike in their discounted variable mortgage rate.

It is dangerous timing for the economy to be undergoing a wide-sweeping rationing of credit to investors followed up by an increase in variable mortgage rates. This combined action hits the housing market more heavily than any other industry, yet new home construction has been the key direct and indirect driver of domestic economic activity in recent years.

Any further interest rate reduction by the RBA which seems less likely post their November decision would need to be timed and communicated to ensure it mitigated rather than exacerbated the adverse impact of a tighter financing environment

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RBA treads most likely path in November: HIA's Harley Dale

 

Harley Dale is chief economist, HIA and can be contacted here.

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Interest Rates

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