The Reserve Bank of Australia has decided to leave the cash rate on hold at 2.25% for April 2015.
Prior to making their decision, there was expectation that the cash rate would be dropped. However the RBA has left the cash rate at the lowest it has been and on hold for the second month in a row. There are still economists who predict a rate cut sometime this year, perhaps mid-year around June.
The RBA noted that here has been moderate overall growth in credit lending across the nation, and with interest rates at an all time low and commodity prices slowly dropping, this growth is expected to continue.
In making their decision yesterday, Glenn Stevens, govenor of the RBA, made the following comments:
"Moderate growth in the global economy is expected in 2015, with the US economy continuing to strengthen, even as China's growth slows a little from last year's outcome.
Commodity prices have declined over the past year, in some cases sharply. The price of oil in particular is much lower than it was a year ago. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global output and temporarily to lower CPI inflation rates. Prices for key Australian exports have also been falling and therefore Australia's terms of trade are continuing to decline.
Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns at all-time lows. Financing costs for creditworthy borrowers remain remarkably low.
In Australia the available information suggests that growth is continuing at a below-trend pace, with overall domestic demand growth quite weak as business capital expenditure falls. As a result, the unemployment rate has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate.
Credit is recording moderate growth overall. Growth in lending to investors in housing assets is stronger than to owner-occupiers, though neither appears to be picking up further at present. Lending to businesses, on the other hand, has been strengthening recently. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The Bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.
The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems likely, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.
At today's meeting the Board judged that it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will continue to assess the case for such action at forthcoming meetings."
With the cash rate held at the lowest it has been, and a cash rate drop expected sometime this year, there is literally no better time than now to take advantage of low interest rates being offered by Australian lenders.
Whether you are an existing home owner, or looking at making the move in to home ownership, contact Iconic today to make sure that you make use of the most suitable and beneficial financial solution available to you.
You can contact our head offices on 1300 663 943.
As always, have a great week ahead. We will be back with you in two weeks time.
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