RBA keeps cash rate on hold for 28th month

The RBA has kept the official cash rate on hold for its final meeting of 2018, extending Australia’s longest ever period without a change to 28 months.

The Reserve Bank has kept the official cash rate on hold for its final meeting of 2018, extending Australia’s longest ever period without a change to 28 months.

The RBA last cut the cash rate to its record low of 1.5 per cent in August 2016, following an earlier cut to 1.75 per cent in May. There has not been an official cash rate increase since November 2010.

“The global economic expansion is continuing and unemployment rates in most advanced economies are low,” RBA governor Philip Lowe said in his statement.

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent - https://t.co/qdMBRLoGf1

— RBA (@RBAInfo) December 4, 2018

“There are, however, some signs of a slowdown in global trade, partly stemming from ongoing trade tensions. Growth in China has slowed a little, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector.”

Most experts don’t expect any change until late 2019 at least, with some saying the next move won’t be until 2020. Mr Lowe told an event in Sydney two weeks ago a shift would come eventually as unemployment drops and inflation is kept in line with its targets.

“If the economy continues to move along the expected path, then at some point it will be appropriate to raise interest rates,” he said. “This will be in the context of an improving economy and stronger growth in household incomes.”

CoreLogic head of research Tim Lawless said the decision came as no surprise due to the diversity of economic conditions, with labour markets improving but wages growth remaining sluggish and inflation having softened.

“It’s a bit harder to gauge the RBA’s view on housing market conditions, with the RBA continuing to call out weakening conditions in Sydney and Melbourne,” he said.

Data released by the research firm on Monday showed house prices in Sydney falling by 8.1 per cent in the year to November, the biggest annual decline since May 1983.

“CoreLogic data to the end of November highlighted that the Sydney market has already recorded a 9.5 per cent decline in values since peaking in July last year and will likely surpass the previous record peak to trough decline of 9.6 per cent which was set during the last recession between 1989 and 1991,” Mr Lawless said.

“Despite this weakness in the largest cites, dwelling values in Sydney remain 41 per cent higher than they were five years ago and Melbourne values are still 38 per cent higher both of which show five-year growth rates well in excess of most other capital city markets.”

While there are growing fears falling property prices will cause a sharp reduction in consumer spending, Mr Lawless said “to date we haven’t seen the housing downturn impacting on household consumption or saving”.

“However this is likely to be a key factor the RBA will be monitoring,” he said.

[e-mail]

— with AAP

Originally published as RBA keeps cash rate on hold for 28th month