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Latest RBA cash rate decision

Latest RBA cash rate decision

The official cash rate remains at 1.5% after the Reserve Bank of Australia’s its final Board meeting of 2018.

At its meeting today, the Board of the Reserve Bank of Australia (RBA) decided to leave the cash rate unchanged at 1.5%.

RBA Governor Philip Lowe's statement was largely unchanged from November. He pointed to the following economic factors as part of the RBA’s decision:

  • Positive business conditions
  • Higher levels of investment in public infrastructure
  • Growth in resource exports
  • Unemployment rate at 5%, the lowest rate in almost six years
  • Low inflation 
  • Low wage growth
  • Conditions in Sydney and Melbourne property markets easing

What's ahead for the Australian economy?

Tim Lawless, Head of Research at CoreLogic, said the RBA’s decision was widely anticipated.

“Considering the diversity of economic conditions, the hold decision comes as no surprise. Labour markets are improving, but wages growth remains sluggish and inflation has softened. It’s a bit harder to gauge the RBA’s view on housing market conditions, with the RBA continuing to call out weakening conditions in Sydney and Melbourne,” said Lawless.

“CoreLogic data to the end of November highlighted that the Sydney market has already recorded a 9.5% decline in values since peaking in July last year and will likely surpass the previous record peak-to-trough decline of 9.6% which was set during the last recession between 1989 and 1991. Despite this weakness in the largest cites, dwelling values in Sydney remain 41% higher than they were five years ago and Melbourne values are still 38% higher, both of which show five year growth rates well in excess of most other capital city markets.”

In a release earlier today Craig James, Chief Economist at Commsec, said the RBA Board expects the next move for the official cash rate to be up, but this may not be for some time.

“The Reserve Bank Board currently believe that the next move in interest rates is more likely to be up, not down. Other countries are normalising monetary policy with similar growth and inflation rates as Australia. So circumstances would certainly need to change markedly for the Board to start altering its view,” said James.

Things you should know: This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia. The commentary provided from external companies that are not a member of the Commonwealth Bank of Australia Group of Companies (the CBA Group) does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. The CBA Group does not accept any liability for losses or damage arising from any reliance on external companies and their products, services and material.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. The commentary provided from external companies that are not a member of the Commonwealth Bank of Australia Group of Companies (the CBA Group) does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia. The CBA Group does not accept any liability for losses or damage arising from any reliance on external companies and their products, services and material.