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April 2019: RBA rates remain unchanged – industry reacts

News Room News RoomApril 3, 2019
3 minutes read

Yesterday (2 April 2019), the RBA Board decided to leave the cash rate unchanged at 1.50 per cent for its 28th consecutive meeting.

Many commentators expected this to be the case as the cash rate has now remained unchanged for 32 months.

Here’s a quick rundown of what happened.

With respect to the housing market:
  • The adjustment in established housing markets is continuing, but conditions remain soft and rent inflation remains low.
  • Credit conditions for some borrowers have tightened a little further over the past year.
  • Meanwhile the demand for credit by investors in the housing market has slowed noticeably as the dynamics of the housing market have changed.
  • Mortgage rates remain low and there is strong competition for borrowers of high credit quality.
With respect to jobs and unemployment:
  • The labour market remains strong with a large increase in employment.
  • The unemployment rate is at 4.9 per cent.
  • The improvement in the labour market should see a gradual lift in wages growth over time.
With respect to growth:
  • The GDP rose by 0.2 per cent in the December quarter to be 2.3 per cent higher over 2018.
  • The growth outlook is being supported by private investment, higher levels of spending on public infrastructure and a steady growth in employment.
  • Despite this, the main domestic uncertainty continues to centre around household consumption in the context of weak growth in household income and falling housing prices in some cities.
With respect to inflation:
  • Inflation continues to remain low and stable.
  • Underlying inflation is expected to pick up over the next couple of years, although it has been taking a little longer than earlier expected.
  • The central scenario is for underlying inflation to be 2 per cent this year and 2¼ per cent in 2020.
  • Headline inflation is expected to decline in the near term because of lower petrol prices.
  • The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.

The Reserve Board Members concluded that, with the available information, the monetary policy would remain unchanged to stay consistent with sustainable growth in order to achieve the set inflation target over time.

CoreLogic

“Although the cash rate remains unchanged since August 2016, there is a growing likelihood that the cash rate will move lower later this year,” said CoreLogic’s Head of Research, Tim Lawless.

“The latest data from CoreLogic shows the pace of decline has eased off somewhat over the past couple of months, but the geographic scope of weak housing market conditions has broadened.

“We should get a better feel for the RBA’s monetary policy position via the Financial Stability Review, released on April 12, and the Statement on Monetary Policy, released on May 10.

“Chances are we will see some downwards revisions to the RBA’s forecasts for economic growth and inflation which could set the scene for lower rates over the second half of the year.”

AMP Capital

Rate City

Mortgage Choice

CommSec

 

News Room News RoomApril 3, 2019
3 minutes read
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