RBA holds official cash rate at December 2018 meeting

Adam Smith 4 December 2018 NEWS

house prices puzzle1The Reserve Bank has again left the official cash rate on hold at 1.50%.

At its final meeting of the year, the RBA chose to leave the official cash rate on hold at 1.50%. The cash rate has now remained stable since August 2016, extending the longest rate of cash-rate stability on record.

The result was widely expected, with 100% of the experts polled in the Finder Monthly RBA Cash Rate Survey tipping the hold. CoreLogic head of research Tim Lawless said diverse economic conditions stayed the RBA's hand for another month.

"Labour markets are improving, but wages growth remains sluggish and inflation has softened. It's a bit harder to gauge the RBA's view on housing market conditions, with the RBA continuing to call out weakening conditions in Sydney and Melbourne," he said.

Lawless pointed to December's CoreLogic Hedonic Home Value Index, which revealed a 9.5% decline for Sydney's housing market since its peak in July of last year.

"Despite this weakness in the largest cities, dwelling values in Sydney remain 41% higher than they were five years ago, and Melbourne values are still 38% higher, both of which show five-year growth rates well in excess of most other capital city markets."

While five of the eight capital cities showed capital growth over the year to date, Lawless said Sydney and Melbourne exerted an outsized influence on national housing figures.

"To date we haven't seen the housing downturn impacting on household consumption or saving; however, this is likely to be a key factor the RBA will be monitoring," Lawless said.

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