The industry has applauded the Reserve Bank’s decision to keep rates on hold.
At its monthly board meeting yesterday, the RBA said it was prudent to leave the official cash rate at 4.75 per cent for another month, as conditions in the housing market continue to deteriorate.
“Rates on hold marked a good and appropriate decision today despite recent hyped-up calls from some quarters for a near term hike,” Housing Industry Association chief economist Harley Dale said.
“New home building activity is heading south and will be substantially weaker this year compared to last, and that’s with interest rates where they are.”
Loan Market Group’s chief operating officer Dean Rushton agreed with Mr Dale and said both the housing market and consumer confidence would benefit from the RBA’s rate decision.
“Consumer confidence remains soft and many elements of the economy, including the retail sector and consumer lending are extremely soft,” Mr Rushton said.
“We’re happy to see rates left on hold for the foreseeable future and can see no reason why they should go up.
“There were four rate rises during 2010 and they are still having an impact on mortgage holders who are coping with the increased cost of utilities, petrol and groceries.
“Any rate increase in the near future would only result in a serious setback to consumer sentiment.”
But while industry pundits are urging the RBA to leave rates on hold for the foreseeable future, there was a slight hardening of the rhetoric in the RBA’s statement accompanying yesterday’s decision.
This development will likely be heavily scrutinised and generate varying views, which unfortunately could heighten uncertainty, dampen confidence, and reduce already declining housing activity.