In their last announcement for 2014, the Reserve Bank of Australia have decided to hold the official cash rate at 2.50%
In a move that was predicted by all of finder.com.au’s cash rate experts, the Reserve Bank of Australia (RBA) has announced that the official cash rate will hold steady at 2.50% for its fourteenth consecutive month.
Just in time for the festive season, the RBA has decided to maintain the relief provided to borrowers, keeping rates its lowest recorded.
In period where investor confidence is slowly being restored, Melissa Browne from A+TA has justified the move, saying that stability is needed.
“The Aussie dollar is still high and other than the property market still potentially overheating in some areas, this isn't enough to raise rates.”
As RBA Deputy Governor Philip Lowe addressed in his speech at the Australian Business Economists (ABE) Annual Dinner in November, the nervousness from investors has stemmed from the end of the mining boom - which has questioned whether Australian businesses can compete internationally.
“The reason that the world has such low interest rates at the moment is that people's desire to save outstrips their desire to create new assets” says Mr Lowe.
“A stronger global investment environment would be likely to see global interest rates rise and this is something that we should all hope occurs sooner rather than later.”
“The issue that many countries are struggling with is how to do this – that is, how to improve the investment climate. Very accommodative monetary policy is playing a role here.”
Hinting of an interest rate rise, finder.com.au’s experts are expecting for it to occur by October 2015.
Latest data from the Australian Bureau of Statistics show a 3.7% increase of value of dwelling commitments from investment housing (fixed loans) from August to September 2014 compared to only a 1.4% increase with owner occupied housing.
“The growth outlook is a little less optimistic while there appears to be less hysteria around the potential risks associated with the housing market,” says Bill Evans, Chief Economist at Westpac.
“Indeed there is no implication of a substantial intervention by the authorities. The Bank is clearly in an ongoing ‘wait and see’ mode.”