RBA Announcement October 2015

RBA Announcement October 2015

As anticipated the Reserve Bank of Australia has decided to leave the cash rate on hold at 2.0% for October 2015. This is the fifth month in a row that the cash rate has been held at this all-time low.

The general feel around if and when and the cash rate will change is quite different across the board. Six of the fourteen leading economists surveyed by AAP anticipate the cash rate to be increased in late 2016. However ANZ bank have predicted a 0.25% cut in early 2016 and Westpac have predicted no changes to the cash rate in the near future.

All in all, interest rates being offered at the moment by bank and non-bank lenders are still appealingly low and now is an opportune time to review your finances and ensure that you are still using the most suitable solutions available to you.

In releasing their decision this morning, Glen Stevens, Governor of the Reserve Bank, made the following comments:

" The global economy is expanding at a moderate pace, with some further softening in conditions in China and east Asia of late, but stronger US growth. Key commodity prices are much lower than a year ago, in part reflecting increased supply, including from Australia. Australia's terms of trade are falling.

The Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease policy. Equity market volatility has continued, but the functioning of financial markets generally has not, to date, been impaired. Long-term borrowing rates for most sovereigns and creditworthy private borrowers remain remarkably low. Overall, global financial conditions remain very accommodative.

In Australia, the available information suggests that moderate expansion in the economy continues. While growth has been somewhat below longer-term averages for some time, it has been accompanied with somewhat stronger growth of employment and a steady rate of unemployment over the past year. Overall, the economy is likely to be operating with a degree of spare capacity for some time yet, with domestic inflationary pressures contained. Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.

In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending. Credit is recording moderate growth overall, with growth in lending to the housing market broadly steady over recent months. Dwelling prices continue to rise strongly in Sydney and Melbourne, though trends have been more varied in a number of other cities. Regulatory measures are helping to contain risks that may arise from the housing market. In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved lower and been more volatile recently, in parallel with developments in global markets. The Australian dollar is adjusting to the significant declines in key commodity prices.

The Board today judged that leaving the cash rate unchanged was appropriate at this meeting. Further information on economic and financial conditions to be received over the period ahead will inform the Board's ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target. "

If you would like to arrange an appointment with an iconic finance broker to review your personal finances, and to assess whether there is a more suitable financial solution available to you in this current market, we invite you to contact our offices on 1300 663 943.

Iconic can also have a vehicle finance division and a financial planning division, so whatever your needs, we'll take you through it.

Have a great week ahead.

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