The RBA has decided to keep the official cash rate at 1.5 % for the current month of October, citing uncertainty in domestic and foreign markets…
This decision is in-line with almost all market predictions.
This announcement marks the 25th straight month that the RBA has maintained the Cash Rate at a historical low of 1.5%. Whilst economic growth levels are currently sitting above trend, a weaker than expected labour market and inflation of 2.1% has dissuaded the RBA from lifting the cash rate at present. Current key concerns in the domestic market include concerns around household consumption, less than ideal levels of inflation and wages growth, and high levels of consumer debt. With a Federal Election looming, the current Royal Commission into Banking, plus continued downward pressure on the property market and farming industry at present, all supports an unchanged cash rate.
Despite this negative sentiment, the Australian economy has grown strongly over the past year, with GDP increasing by a total of 3.4 per cent, and forecasts expecting average growth to remain slightly above 3 per cent over 2018 – 2019. Business conditions are looking positive moving forward with non-mining investment set to increase. Unemployment is on the decline and at 5.3% is at its lowest in almost six years. Given the overall domestic uncertainty coupled with the current US-China trade dispute, suggests that an interest rate rise should not be expected until the end of 2018 if not early 2019. Economic growth will continue to be gradual in the interim.