Rates tipped to stay on hold

HOUSEHOLDS look set to gain the full benefit of a new round of tax cuts which begin today as the Reserve Bank of Australia (RBA) is widely expected to leave its cash rate unchanged for now.

HOUSEHOLDS look set to gain the full benefit of a new round of tax cuts which begin today as the Reserve Bank of Australia (RBA) is widely expected to leave its cash rate unchanged for now.

The RBA holds its monthly board meeting later today, and economists are tipping that it will leave its key rate unchanged at 7.25 per cent for a fourth straight month.

Economists says 12-year high interest rates and record petrol prices have combined to slow domestic demand, which should tame price pressures over time.

Underlying inflation is running at a 16-year high of 4.25 per cent, way above the RBA's 2 to 3 per cent target band.

An unexpected fall in employment growth reported last month and tame wage increases should also allow the RBA to sit pat for another month.

However, some economists still see a risk of a rate rise in August - after official inflation readings are released on July 23 - given private surveys have shown no let-up in growing price pressures.

The central bank raised rates four times between August last year and March in its fight against inflation, and a total 12 times since May 2002.