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RBA makes cash rate call for June

RBA makes cash rate call for June

RBA
Reporter
05 June 2018 — 2 minute read

The Reserve Bank of Australia has announced the decision of its monthly board meeting.

The RBA board has again decided to keep the cash rate at a record low of 1.5 per cent, in a move predicted by most industry pundits.

None of the surveyed respondents on finder.com.au’s panel of industry pundits predicted a rate change, despite some economic indicators showing signs of a slowdown.

The decision once again breaks the record for the longest period of time in Australian history that the cash rate has remained at the same level.

In April of this year, the RBA broke the former record of 17 consecutive meetings of unchanged interest rates (set in 1995-1996) when it kept the cash rate on hold for the 18th time.

The June decision continues the record-breaking run, as Australia’s official cash rate has now been 1.50 per cent for the 20th consecutive time (or 22nd consecutive month, seeing as there is no cash rate announcement in January).

Economist at AMP Capital Shane Oliver said: “Basically nothing has changed. Signs of stronger investment, booming infrastructure spending, strong export volumes and the RBA’s own forecasts argue against a cut.

“Uncertainty around consumer spending, the slowing Sydney and Melbourne property markets, tightening bank lending standards and the slowing Sydney and Melbourne property markets argue against a hike, so no case to move.”

Mortgage Choice’s head of corporate affairs, Jacqueline Dearle, echoed Mr Oliver’s sentiment, saying: “The RBA’s decision to hold would be consistent with sustainable growth in the economy, home loan demand remaining stable and achieving the inflation target over time.”

Capital Economics’ Paul Dales claimed that the central bank’s determination was influenced by the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

“Economic conditions are not strong enough to warrant higher rates and the RBA is becoming concerned that the banking royal commission will result in some households and businesses finding it harder to get credit. The RBA won’t want to raise the price of credit at the same time,” Mr Dales said.

LJ Hooker’s head of research, Mathew Tiller, also noted that economic conditions argued against a rate change, but he believes the RBA would be pleased with recent housing market trends.

“There has been no material change in indicators since last month. Property price growth continues to moderate, which will be welcomed by the RBA. Investor demand has eased, with owner-occupiers and first home buyers coming back into the market to fill the gap,” Mr Tiller said.

However, despite also predicting a hold verdict, managing director of Market Economics Stephen Koukoulas said he believes the central bank should cut rates.

“It remains the case that the RBA is downplaying the news of falling house prices, rising unemployment rate, weak wages and inflation. It should cut rates but it won’t,” Mr Koukoulas said.

RBA makes cash rate call for June
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