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RBA leaves rates on hold

By Eleanor Hopkins

With the distractions of the federal election now behind the nation, the Reserve Bank has decided, as expected, to leave interest rates on hold again this month and are still at 2.5 percent.

Despite the decision by the Bank to leave rates on hold, signs continue to grow of a weakening national economy. The unemployment rate increased over August to 5.8 percent which is the highest monthly rate recorded for 4 years. The national unemployment rate is now significantly higher than the 5.1 percent recorded a year ago over August 2012.

The Australian dollar has continued to strengthen over recent weeks contrary to the Banks preferred position on the local currency. Retail sales remain flat and although house building has improved over recent months overall levels remain relatively modest given current historically low interest rate settings.

Despite a weakening economy, housing markets continue to strengthen with buyer activity intensifying over the month particularly in Sydney and Melbourne.

“The latest economic data points to a weakening economy and, although the Bank has decided to leave rates on hold for this month, a further cut in rates is in prospect sooner rather than later particularly if the unemployment rate continues to rise”, says Dr Andrew Wilson Senior Economist for Australian Property Monitors.

“The apparent dilemma for the Bank is the current strong performance of housing markets with the strongest prices growth recorded for 4 years. However recent housing market performance remains mixed and patchy with Sydney and Melbourne clearly strong and strengthening but offset by continuing flat prices growth in other capitals”.

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