As anticipated, the RBA has again kept the cash rate on hold at 1.50 per cent, where it has remained since August 2016 when the cash rate was lowered by 25 basis points. This is the 27th consecutive month that the official interest rate has been kept on hold.
AMP chief economist Shane Oliver said that the RBA remains between a rock and a hard place.
“Strong infrastructure spending, improving non-mining investment, a lessening drag from falling mining investment and a fall in unemployment to 5 per cent are all good news,” Mr Oliver said.
“But against this, the housing cycle has turned down, this will act as a drag on housing construction and consumer spending via a negative wealth effect; wages growth remains weak; inflation is below target; and share market volatility is highlighting risks to the global outlook. So, yet again, the RBA will remain on hold.”
Despite the heightened concern regarding falling house prices and the knock-on effect it will have across the economy, ABC Bullion chief economist Jordan Eliseo predicts that the RBA will hold into the first half of 2019 at the latest.
“Actual economic data is still relatively strong, though we expect the economy will hit a rougher patch next year, with the RBA eventually trimming rates towards 1 per cent,” Mr Eliseo said.
My Housing Market chief economist Andrew Wilson said that November was the last chance for an effective rate cut to stimulate stagnant incomes and consumption ahead of what is likely to be another underwhelming Christmas retail period.
“Also, last month was last chance to stem increasing downward momentum in house prices — likely also to ironically be of growing concern now to RBA given its impact on consumer sentiment and sharply reduced economic activity from the property and finance sectors,” Mr Wilson said.
“So [rates are] set to be on hold for the foreseeable future, with the RBA unlikely to cut ahead of the growing likelihood of a downturn in the global economy.”
The RBA has become totally ineffective and should have acted long ago to stem the overheated housing market. Both the Federal Government and the RBA economic decision making has been neutralised through fear of triggering a major bust and the flow on to banks which represent approx. 25% of the ASX value. Are we really a One Trick Pony and who is really in control?