RBA Announcement - December 2015

RBA Announcement - December 2015

As predicted by most of Australia's leading economists, the Reserve Bank of Australia has released their decision this morning to leave the cash rate on hold at 2.0 % for December 2015. The cash rate has now been left at 2.0%, a record low for Australia, since May this year.

Governor of the Reserve Bank, Glenn Stevens, gave a speech last week indicating that he is still prepared to reduce the cash rate if it is necessary for him to do so.

Glenn Stevens made the following comments in releasing the RBA's decision this morning:

"The global economy is expanding at a moderate pace, with some softening in conditions in the Asian region, continuing US growth and a recovery in Europe. Key commodity prices are much lower than a year ago, reflecting increased supply, including from Australia, as well as weaker demand. 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 monetary policy. Volatility in financial markets has abated somewhat for the moment. While credit costs for some emerging market countries remain higher than a year ago, global financial conditions overall remain very accommodative.

In Australia, the available information suggests that moderate expansion in the economy continues in the face of a large decline in capital spending in the mining sector. While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions in non-mining sectors over the past year. This has been accompanied by stronger growth in employment and a steady rate of unemployment.

Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet. Inflation is forecast to be consistent with the target over the next one to two years.

In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending. While the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative. Credit growth has increased a little over recent months, with credit provided by intermediaries to businesses picking up. Growth in lending to investors in the housing market has eased. Supervisory measures are helping to contain risks that may arise from the housing market.

The pace of growth in dwelling prices has moderated in Melbourne and Sydney over recent months and has remained mostly subdued in other cities. In other asset markets, prices for commercial property have been supported by lower long-term interest rates, while equity prices have moved in parallel with developments in global markets. The Australian dollar is adjusting to the significant declines in key commodity prices.

At today's meeting the Board again judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand. The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target."

As many of you are probably aware there are lots of changes happening at the moment in the finance and property industries, however it is important to remember that the changes being made are done with the intention of improving and maintaining the strong Australian property market and overall economy.

Despite recent interest rate increases being implemented by the four major banks, there are still some great products and interest rates available through non-bank lenders. Now is the perfect time to review and secure your finances and make sure that you are stil using the most suitable financial solution available to you.

We invite you to contact iconic home loans on 1300 663 943 to discuss any financial needs that we can assist with.

Enjoy the week ahead.
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NB: The information provided here is of a general nature only and you should seek independant financial advice before making any decisions in relations to your personal finances.