Reserve Bank keeps rates on hold in first meeting of the year
The Reserve Bank of Australia has left the official cash rate unchanged at 2.5%, in line with analysts’ predictions.
It is the fifth meeting month in a row the Reserve Bank has left rates unchanged at a record low.
In the statement released by the Reserve Bank noting that they would keep rates on hold, governor Glenn Stevens said that since the previous meeting, information on the global economy has been consistent with the growth having been a bit below trend in 2013, but with prospects of a 2014 pick up.
"In Australia, information becoming available over the summer suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have shown improvement," Stevens said.
"At the same time, with resources sector investment spending set to decline significantly, considerable structural change occurring and lingering uncertainty in some areas of the business community, near-term prospects for business investment remain subdued. The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. Growth in wages has declined noticeably."
The RBA previously cut rates in August 2013, May 2013, December 2012, October 2012, June 2012, May 2012, November 2011 and December 2011.
RP Data’s national research director, Tim Lawless, said that the decision has come as no surprise to the industry, with a number of positive data flows over recent weeks.
“From a housing market perspective, the release of the RP Data – Rismark Home Value Indices yesterday showed home values were still rising across Australia, up a strong 1.2%over the month of January,” said Lawless.
“The latest housing market results take annual capital gains across the combined capital cities to 9.8%, with every capital city apart from Hobart recording a rise in dwelling values over the year,” he said.
“While the Reserve Bank leaves the cash rate unchanged at 2.50%, it’s game on for borrowers. Lenders are moving outside the cash rate which means borrowers are likely to find even better deals this year.”
Michelle Hutchison from Finder said that it’s worth keeping an eye on the movements that the lenders make.
“For the past 2 years up until November 2013, lenders have generally moved when the cash rate moved, but in the last month we recorded 42 home loan rate changes by 14 lenders, where more than half have decreased their rates including some variable loans,” said Hutchison.
“Of those, only two from the big banks have lowered their fixed rates - Westpac and NAB both decreased their three year fixed package home loan by 0.05% to 5.14%.”
“This is good news for borrowers as you no longer have to wait for the cash rate to change. You can capitalise on the competition from lenders by comparing loans and switching to cheaper deals,” she said.