Welcome to Fairchild Group, we have over 20 years experience...

Head Office: Level 5, 17 Castlereagh St Sydney, NSW, 2000

Australia Maintains Cash Rate at Record Low

At its October 7th, 2014 meeting, the Reserve Bank of Australia decided to leave the cash rate unchanged at a record low of 2.5 percent, as on present conditions, the most prudent course is likely to be a period of stability in interest rate. In the Board’s judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target.

The central bank also noted that the declining of the country’s exchange rate, in large part was reflecting the strengthening US dollar, but remains high by historical standards, particularly given the further declines in key commodity prices in recent months. It is offering less assistance than would normally be expected in achieving balanced growth in the economy.
Excerpt from the statement by Glenn Stevens, Governor:

Growth in the global economy is continuing at a moderate pace. China’s growth has generally been in line with policymakers’ objectives, though some data suggest a slowing in recent months. Weakening property markets there present a challenge in the near term. Commodity prices in historical terms remain high, but some of those important to Australia have declined further in recent months.

Volatility in some financial markets has picked up in recent weeks. Overall, however, financial conditions remain very accommodative. Long-term interest rates and risk spreads remain very low. Markets still appear to be attaching a low probability to any rise in global interest rates or other adverse event over the period ahead.

In Australia, most data are consistent with moderate growth in the economy. Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend for the next several quarters.

Labour market data have been unusually volatile of late. The Bank’s assessment remains that although some forward indicators of employment have been firming this year, the labour market has a degree of spare capacity and it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably and is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and have continued to edge lower over recent months as competition to lend has increased. Investors continue to look for higher returns in response to low rates on safe instruments. Credit growth is moderate overall, but with a further pick-up in recent months in lending to investors in housing assets. Dwelling prices have continued to rise over recent months.

Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

 

DISCLAIMER: This disclaimer is a requirement of the Securities Industry Legislation Act. The writer of this article is not a practicing lawyer or financier. The information, statements and opinions expressed are intended only as a guide as to some of the important considerations to be taken into account relating to property investment. I strongly suggest that you consult with licensed professionals such as accountants, Lawyers, Valuers, Development Consultants, Quantity Surveyors and others, BEFORE signing any contracts or other binding documents.