Reserve Bank Announcement - December 2017

Yesterday the Reserve Bank of Australia (RBA) met for the last time in 2017 to set the cash rate for the month ahead. Following its meeting, the RBA announced their decision to leave the cash rate on hold at 1.50% for December 2017.

In releasing their decision Phillip Lowe, Governor of the RBA, made the following comments:

  • Conditions in the global economy have improved over 2017;
  • Australia’s terms of trade are expected to decline in the period ahead but remain at relatively high levels;
  • Wage growth remains low in most countries, as does core inflation;
  • Equity markets have been strong, credit spreads have narrowed over the course of the year and volatility in financial markets is low;
  • Recent data suggests that the Australian economy grew at around its trend rate over the year to the September quarter;
  • The central forecast is for GDP growth to average around 3 percent over the next few years;
  • Business conditions are positive and capacity utilisation has increased;
  • The outlook for non-mining business investment has improved further, with the forward-looking indicators being more positive than they have been for some time;
  • Increased public infrastructure investment is also supporting the economy;
  • One continuing source of uncertainty is the outlook for household consumption with household incomes growing slowly and debt levels high;
  • Employment growth has been strong over 2017 and the unemployment rate has declined;
  • Employment has been rising in all states and has been accompanied by a rise in labour force participation;
  • The various forward-looking indicators continue to point to solid growth in employment over the period ahead;
  • Some employers have reported finding it difficult to hire workers with the necessary skills, however wage growth remains slow. This is likely to continue for a while yet, although the stronger conditions in the labour market should see some lift in wage growth over time;
  • Inflation remains low, with both CPI and underlying inflation running a little below 2 percent;
  • The Australian dollar remains in the range that it has been in over the past 2 years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation that currently forecast;
  • Growth in housing debt has been outpacing the slow growth in household income for some time now. To address the medium-term risks associated with high and rising household indebtedness, APRA has introduced several supervisory measures;
  • Credit standards have been tightened in a way that reduces the risk profile of borrowers;
  • Nationwide measures of housing prices are little changed over the past 6 months, with conditions having eased in Sydney;
  • Rent increases remain low in most cities;
  • The low level of interest rates is continuing to support the Australian economy; and,
  • Considering the available information, the Board judged that holding the stance on monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

To read the full statement released by the RBA, please click here.

The next cash rate update is scheduled to take place on the first Tuesday in February 2018.

If you have any questions about this update, please do not hesitate to contact us.

Now is the perfect time to review your existing financial solutions to see if there is a most suitable solution now available to you. To arrange a complimentary review appointment with an iconic broker, please send us an email with your name and contact details and someone will give you a call.

We will be back with you in the New Year with a cash rate update in February 2018.

Have a fantastic Christmas guys and all the best for the New Year.

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