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RBA leaves rates on hold

Tuesday, 2nd Jun 2015
Categories: Market News, Newsletter

rbaThe Reserve Bank of Australia (RBA) has decided to leave the official cash rate unchanged at 2% at its June board meeting.

Announcing the decision, RBA governor Glenn Stevens said holding rates at current levels was appropriate given the bank cut rates last month.

He said the RBA needed more time to assess the “economic and financial” affects that last month’s rate cut would have on the economy and whether this would “foster sustainable growth and inflation consistent with the target”.

“In Australia, the available information suggests the economy has continued to grow, but at a rate somewhat below its longer-term average,” Mr Stevens said.

“Household spending has improved, including a large rise in dwelling construction, and exports are rising,” he said, adding that spending by businesses and the public sector is expected to remain subdued.

“Overall, the economy is likely to be operating with a degree of spare capacity for some time yet. With very slow growth in labour costs, inflation is forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.”

Mr Stevens highlighted the strong rises in Sydney property prices, but emphasised that it was working with regulators to “contain risks”. This is a reference to Sydney’s overheated property market.

Finance lenders have already begun to clamp down on investor loans by requiring larger deposits and discontinuing incentives.