Reserve Bank of Australia leaves cash rate on hold at 2.5 per cent in June

THE Reserve Bank has opted to leave the cash rate on hold at 2.5 per cent in June, but borrowers are being warned to brace for rises in future.

The Reserve Bank Of Australia (RBA) in Martin Place, Sydney on Thursday, March 9, 2012. (AAP/Joel Carrett) NO ARCHIVING

THE Reserve Bank has opted to leave the cash rate on hold at 2.5 per cent in June for the ninth meeting in a row.

The move was widely expected by economists, although borrowers have been warned to brace themselves for interest rate increases next year as the non-mining sectors of the economy start to pick up pace.

Nine out of 15 economists surveyed by AAP say there won’t be any movement before the end of 2014. However nearly all are expecting a string of interest rate hikes next year that will push the cash rate to around 3.25 per cent.

Borrowers have been warned rates are likely to rise next year.

Official data released Thursday showed that the mining investment boom has passed, with capital expenditure in the sector falling almost nine per cent in the March quarter.

However, investment intentions for the 2014/15 financial year in the non-mining sectors of the economy have risen to their highest levels since the global financial crisis.

Citigroup head of economics Paul Brennan said the figures show that the economy should rebalance away from being driven by mining investment smoother that previously expected.

“We believe the expectations data is above what the RBA would have pencilled in,” he said.

RP Data’s research director Tim Lawless said a fall in house prices for the first time in 12 months mean the Reserve Bank shouldn’t be concerned about the property market overheating.

“Australia’s housing market has seen two years of escalating property values, so from a cyclical perspective the housing market is due for a slowdown. Cooler housing market conditions shouldn’t surprise the Reserve Bank, who have been warning about overheated conditions and speculative investment activity in the Melbourne and Sydney markets,” he said.

Originally published as Reserve Bank of Australia leaves cash rate on hold at 2.5 per cent in June