No Melbourne Cup Day rate cut for RBA

Adam Smith 7 November 2017 NEWS

Rate graph

The Reserve Bank has yet again left the official cash rate on hold at 1.50%.

At its November 2017 meeting, the Reserve Bank board chose to leave the official cash rate untouched. The result was correctly predicted by 100% of the experts polled in the monthly finder Reserve Bank Survey.

Cooling housing market conditions could have helped to stay the RBA’s hand, according to CoreLogic research head Tim Lawless.

“A slowdown in housing market conditions has helped to alleviate some of the pressure to raise the cash rate. The fresh round of macro-prudential policies announced in late March have resulted in tighter credit policies and premiums on mortgage rates for investors and interest only borrowers. Tougher lending conditions have arguably had a similar effect as a lift in the cash rate, except the effect is more focussed on slowing investment activity across the housing sector while low interest rates continue to provide a broader and much needed economic stimulus,” Lawless said.

And the RBA may tread lightly before raising rates, Lawless indicated, with Australian households highly indebted.

“Household budgets are already thinly stretched. Subdued demand is evident in weak retail spending, down 0.3% in the September quarter, against a backdrop of record low wages growth of 1.9%, and rising energy costs. It is highly likely that a lift in the cash rate would further dampen household consumption, potentially leading to slower economic growth and fewer new employment opportunities,” Lawless said.

To stay on top of the trends, changes and predictions in the Australian property and home loan market be sure to check out finder's property news page.

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