Reserve Bank holds steady on rates

Reserve Bank holds steady on rates

Posted on Tuesday, July 02 2013 at 3:41 PM

The official cash rate remains on hold at 2.75 per cent following today’s meeting of the Reserve Bank of Australia (RBA).

A yo-yoing Australian dollar, uncertainty surrounding
commodity prices and the relatively steady performance of our major trading
partner, China, are all tipped to have contributed to the decision.

Rates are at their lowest level on record, following a 25
basis point cut in May. However this time around, almost all economists
expected interest rates to stay steady for the second consecutive month.

Observers say the bank is likely taking each month as it
comes, observing economic data to judge whether its current downward course of
action is proving effective.

RP Data national research director Tim Lawless says the
continuing recovery in the housing market is also likely to have given the RBA
Board some cause for relief.

“Dwelling values are up three per cent over the first half
of the year and over the June quarter dwelling values by just 0.2 per cent,”
Lawless says.

Low mortgage interest rates are having their desired effect,
he believes. Transaction numbers are rising, with national home sales almost 13
per cent higher over the past three months compared to the same period in 2012.

“This scenario of rising demand but contained value growth
is likely to be exactly what the RBA are seeking from the national housing

Raine Horne chief operating officer Brian Reid says
he’s not surprised by the RBA’s “watch and wait” approach.

“However a rate cut would’ve helped to reinforce improving
buyer confidence in many property markets across Australia over the cooler
months,” he says.

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