RBA rates remain on hold

In its last meeting for 2017, The Reserve Bank of Australia has today decided to keep the official cash rate on hold at 1.5%.

“Australia will kick off 2018 with ultra-low interest rates following this afternoon’s decision from the RBA,” remarked Shane Garrett, HIA Senior Economist.

“The RBA’s official cash rate has been held at 1.50 per cent since August 2016. We are close to marking the longest ever period without a change in interest rates. “The current interest rate environment is remarkable in that borrowing costs are very low. Along with this, the unprecedented stability in rates over the past 18 months makes for a very favourable setting in terms of planning for business investment and economic activity generally.

“There is little basis for expecting interest rate rises over the short term. Price inflation is weak, wages growth is close to a 20-year low and the pace of economic expansion is sub-par. “In short, the RBA must keep interest rates low at this time.

But it’s not all good news for homeowners as the big banks are still likely to increase their own home loan rates, according to REA Group Chief Economist, Nerida Conisbee.

“Banks are under pressure from rising wholesale costs – basically Australians borrow more than they save and this means that banks have to borrow money from overseas. With US rates, in particular, rising quite rapidly, this will be partly passed on to mortgage holders even if the RBA doesn’t increase rates,” she said.

REINSW President Leanne Pilkington said it is unlikely that we will see interest rate movement from the RBA in 2018.

“The OECD has recently signalled that the winds of change in the Australian economy may be preparing to blow, and that a rate rise may come sooner than previously thought. Even so, this would be 12 months away,” Ms Pilkington said.

“With the heat gone from the housing market, and with wages, unemployment and inflation steady, there’s little impetus for the RBA to tinker with interest rates in the near term.”

Ms Pilkington said property prices are likely to remain stable due to robust demand, though the number of foreign buyers may ease.

“The supply cycle in many markets has peaked, so we see 2018 as a steady year categorised by absorption, with those projects that are underway and recently completed best positioned to absorb prevailing domestic demand,” she said.

The next meeting will be Tuesday 6 Feb, 2018.

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Samantha McLean

Samantha McLean is the Co-Founder and Managing Editor of Elite Agent and Host of the Elevate Podcast.