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Cash Rate on Hold At 1.5% For 31 Consecutive Months

Cash Rate has continued to remain on hold with the Reserve Bank of Australia (RBA) holding the official cash rate at a record low of 1.5 per cent.

It has been two and half years (August 2016) since the RBA last made a monetary policy adjustment.

Shane Oliver, Chief Economics at AMP Capital observed: “Things aren’t yet weak enough to push the RBA to cut but they aren’t strong enough to push it to hike either”.

Governor Philip Lowe stated in his monetary policy decision statement that: “The main domestic uncertainty continues to be the strength of household consumption in the context of weak growth in household income and falling housing prices in some cities”.

Managing director of Mortgage Aggregator ‘Finsure’, John Kolenda expects that the cash rate will remain on hold for the coming months as we face political uncertainty with the coming elections.

John Kolenda spoke to the Advisor and stated; “There are political distractions for the RBA with the federal budget being handed down on April 2, which is the same day the central bank next deliberates on rates,”

“Then there is the federal election, which is due by mid-May. Like the budget, the election outcome and a potential change of government will have a significant economic impact which the RBA will need to factor in”.

In light of the recent Hayne Royal Commission, John Kolenda agrees that a rate cut seems inevitable due to a large amount of macro and microeconomic factors weighing down economic activity.

John Kolenda went on to say that with the lending landscape also so restrictive, complicated and confusing, that he has seen dramatic reduction in borrowing capacities for consumers, with the average consumer qualifying to borrow 20 per cent less now than six months ago.

It is in Tim Lawless’ opinion, Head of Research at property research group ‘CoreLogic’ that; “Strong Labour Market report for January was likely a key factor in keeping rates on hold”.

 

[Sources: The Adviser, The West Australian]

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