RBA happy not to rock the boat

RBA happy not to rock the boat

Posted on Tuesday, November 04 2014 at 3:17 PM

To the surprise of almost no one, the Reserve Bank of Australia (RBA) today announced it will be keeping the official cash rate (OCR) at 2.5 per cent for the 15th month in a row.

RBA governor Glenn Stevens said in the announcement: “In Australia, most
data are consistent with moderate growth in the economy. Resources sector
investment spending is starting to decline significantly, while some other
areas of private demand are seeing expansion, at varying rates. Public spending
is scheduled to be subdued. Overall, the Bank still expects growth to be a
little below trend for the next several quarters.

He went on to say: “Monetary policy remains accommodative. Interest rates are very low and
have continued to edge lower over the past year or so as competition to lend
has increased.

continue to look for higher returns in response to low rates on safe
instruments. Credit growth is moderate overall, but with a further pick-up in
recent months in lending to investors in housing assets. Dwelling prices have
continued to rise,” he added.

RP Data research director Tim Lawless said earlier
today: “From a housing market perspective, the RBA is more concerned about the
level of investment in housing rather than the pace of capital gains.

“In fact, the rolling annual change in capital city dwelling values has
been moderating since April this year, suggesting that some heat is coming out
of the market. Rather than pushing interest rates higher, which would have a
detrimental effect on many aspects of the economy, it’s looking more likely
that APRA and the RBA will aim to cool investor demand by tweaking the risk
appetite for bank lending to investors.

“With interest rates remaining low, probably at least well into 2015‎,
we expect dwelling values will continue to rise, however each city is showing
different trends, with Perth and Canberra already well through the peak of
their cycles and the annual rate of growth slowing across the Sydney and
Melbourne markets, the RBA should be less concerned about overheated housing
values,” Lawless added.

REINSW deputy president John Cunningham says the
RBA’s decision to keep interest rates on hold was down to the long run of
stability since the June 2002 to October 2003 run.

“After five out of the last eight November board
meetings saw moves up or down, the RBA has chosen not to back precedence this
cup day,” he says.

“We expect that rates will remain stable and may
even break the longest streak of steady rates ever seen in Australia.

“Again we caution those interested in purchasing
property to ensure that they review the market carefully and don’t overextend
themselves,” Cunningham adds.

The general feeling among experts seems to be
that the interest rate will not see any movement at all until at least well
into 2015. 

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