As was widely predicted
, the Reserve Bank of Australia left the official cash interest rate on hold at 2% at today’s meeting.
The decision means the cash rate has now remained unchanged for five months, with the last rate movement being a 0.25% decrease in May.
While the condition of Australia’s housing markets would likely have played a role in the decision, CoreLogic RP Data research head Tim Lawless said the RBA board had not seen enough changes to make a rate move necessary.
“The flat rate of growth across the Sydney housing market last month, together with a slowdown in investment related mortgage activity wasn’t enough to sway the RBA into another interest rate cut this month,” Lawless said.
“We saw the rate of capital gain flatten out across the Sydney housing market during September, however the trend rate of growth remains very strong, with Sydney values almost 17% higher over the past twelve months and 4.6% higher over the September quarter, he said.
“Other housing market data is suggesting that conditions may be slowing, with clearance rates reducing to the low 70% range in both Sydney and Melbourne on higher volumes and the number of homes available for sale rising higher than a year ago, providing prospective buyers with more options and less urgency in their decision making.”
Lawless said the changes in Sydney’s market give the RBA added flexibility for their decisions in coming months; however, other economic factors point to rates staying around the 2% mark.
“The slower capital gain conditions in Sydney may give the RBA some flexibility when considering future interest rate movements, however if the Melbourne market continues to gather pace as Sydney slows down, the effects of slower conditions in Sydney may not be seen in the headline readings for housing market performance.
“With the Aussie dollar holding around the US$0.71 mark, inflation remaining low and labour market conditions relatively steady, the RBA is in a good position to keep interest rates at their record lows.”
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