Another month of cash rate stability, RBA decrees

By James Brown

When the board of the Reserve Bank of Australia (RBA) board meets every month, it's always a matter of suspense. What will the outcome be? Will the cash rate fall yet again to a new never-before-seen low, sending mortgage rates falling and making it much easier to buy property in Burpengary and surrounding areas? Will it stay the same, giving home buyers a much needed dose of dependability when it comes to meeting their repayments? Or might it even go up, putting a slight squeeze on buyers?

Fortunately, when it came to the cash rate decision for this August, the third was never an option. The debate has always been about whether the rate will stay the same, or drop below 2 per cent for the very first time. And although the latter is not ruled out for some time in the future, the RBA has decided to simply keep the cash rate where it is for now. 

Noting that "the economy is likely to be operating with a degree of spare capacity for some time yet", RBA governor Glenn Stevens explained: "In such circumstances, monetary policy needs to be accommodative." He did note, however, that as economic and financial conditions changed in the future, the board's current stance on the cash rate may have to change. 

According to CoreLogic RP Data head of research Tim Lawless, housing value growth would have been a key topic in the board's deliberations. While there was some risk the RBA would consider raising the rate in order to dampen growth, according to Mr Lawless, conditions outside Sydney and Melbourne have made this unnecessary. 

Brisbane, for instance, had the third highest yearly rate of growth of the capitals, but this was only 3.9 per cent. While this suggests real estate in Deception Bay, Narangba and other areas will still appreciate handsomely in value, it's a far cry from the 18.4 and 11.4 per cent changes seen in Sydney and Melbourne, respectively. Interest rates are therefore likely to stay low for some time yet.

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