Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Still Some Room to Move on Interest Rates

Newspaper article Sunshine Coast Daily (Maroochydore, Australia)

Still Some Room to Move on Interest Rates

Article excerpt

PREDICTED growth in the Australian economy of about 3% has allowed the Reserve Bank of Australia (RBA) to keep the cash rate on hold for another month.

This is despite retail sales figures released this week showing a 10% drop in consumer spending Co the largest monthly fall in seven years.

In a statement RBA governor Glenn Stevens said the board judged that the stance of monetary policy remained appropriate. Inflation is expected to be consistent with the target and growth close to trend but with a more subdued international outlook than was the case a few months ago.

Mr Stevens said the 125 points in rate cuts since November were still working their way through the economy and the expectation was for further progress in addressing Europe's financial problems.

The RBA last cut the cash rate by 25 basis points in June, following a 50-basis-point cut in May. Inflation has remained at 2.2% from January to August Co at the lower end of the RBA's target range.

Yet economists tend to think there is room for another rate cut before the end of the year. A softer labour market at home together with a sluggish US economy, the struggling Euro zone and a slowdown in Asia will be challenging for the national economy.

However, home finance and real estate sectors anticipate a spring surge in activity despite the RBA maintaining its wait and see approach on official interest rates.

Loan Market corporate spokesman Paul Smith said keeping the cash rate at 3.5% was well above many of Australia's major trading partners. But in staying on the interest rate sidelines for the past three months it hadn't deterred consumers who were showing more confidence with another rate rise unlikely in the foreseeable future.

Real Estate Institute of Australia (REIA) president Pamela Bennett said this week's announcement coincided with the release of its housing affordability report for the June quarter showing a 0.8% improvement in the proportion of income required to meet loan repayments. C[pounds sterling]It seems the market may be responding to previous interest rate cuts, but there are a number of other measures we need to take into account before we can call it a change in direction,C[yen] Ms Bennett said. …

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