Rates to hold at 1.5 percent until 2017: RateCity.com.au

Rates to hold at 1.5 percent until 2017: RateCity.com.au
Rates to hold at 1.5 percent until 2017: RateCity.com.au

Analysis from RateCity.com.au predicts the cash rate will hold at 1.50 percent at today's Reserve Bank meeting, stating the Board will likely to sit on its hands until the August cut has had a chance to flow through the economy. 

According to RateCity.com.au analysis of over 30 key economic indicators, the RBA will continue its wait-and-see approach in September in the lead up to the busy Spring housing period. 

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Rates to hold at 1.5 percent until 2017: RateCity.com.au

Peter Arnold, data insights director at RateCity.com.au, said a hot housing market, high household debt levels and subdued investor lending has steadied the RBA’s hand. 

“After two rate cuts this year the housing market is heating up, with house prices holding strong and auction clearance rates and building approvals both rising,” he said.   

“Australian households have more debt compared to the size of the country’s economy than any other in the world, partially fuelled by record low rates.

“The higher our debt levels, and the closer we get to a zero cash rate, the less effective each cut becomes and the RBA will be keenly aware of that fact having seen the impact of negative rates around the world. 

“Evidently, consumer confidence took a dive, despite rate cuts in May and August, driven by households' views of the economic outlook.

“In theory, a rate cut gives consumers some more spending money which helps to kick along the economy. But the banks withheld almost half of the last cut, so the Board is unlikely to pull the trigger again this year. 

“On top of that, APRA and the banks are happy with the caps put on investor lending, which gives the RBA further breathing room.” 

“The Federal Reserve is getting closer to lifting US interest rates, while Chinese iron ore futures tumbled late last month putting further pressure on our export prices – both of which have ramifications for our domestic economy."

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