RBA holds at Governor Stevens' last board meeting

The RBA cash rate decision came out at 2.30 today with the decision to hold rates at 1.5 percent.

Taking account of the available information, and having eased monetary policy at its May and August meetings, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

"Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments.

"The best available information suggests that dwelling prices overall have risen moderately over the past year and growth in lending for housing purposes has slowed.

"Considerable supply of apartments is scheduled to come on stream over the next couple of years, particularly in the eastern capital cities," it advised.

After two rates cuts already this year the hold decision was widely anticipated as the RBA monitors the effects of the record low cash rate on the economy and currency according to Tim Lawless, CoreLogic head of research.

"The RBA is likely to be keeping a keen eye on the housing market; since the May rate cut and subsequent cut in August, many of the key housing market indicators have bounced higher," he said.

"Auction clearance rates have returned to the highest reading in more than a year, albeit on lower volumes.  

"CoreLogic’s hedonic index has seen some acceleration in the rate of capital gain across the already hot Sydney and Melbourne markets and the value of investor housing finance commitments have recently rebounded to the highest levels since August last year.  In contrast, there has been a consistent wind down in transaction numbers which implies market demand may be getting exhausted. 

"While affordability barriers and tighter lending conditions are likely to be contributing to the slowdown in transactional activity, another factor is simply that there are historically low numbers of homes being advertised for sale in Sydney and Melbourne which is contributing to the upwards pressure in the market and limiting transaction activity due to low stock levels. 

"With monthly indicators of inflation remaining low and the Australian dollar remaining relatively high, there remains a strong chance of another rate cut later this year. The most likely timing will be the November RBA meeting when September quarter inflation data is available. 

"Another low inflation reading combined with a stubbornly high dollar could result in the cash rate moving lower."