RBA makes first interest rate decision of Turnbull era

The Reserve Bank of Australia has revealed the result of its first monthly board meeting since the change of prime minister.

Board members confirmed widespread predictions by leaving the official cash rate at a record-low setting of 2 per cent, where it has been since May.

All 31 economists and commentators surveyed by comparison website finder.com.au had forecast that rates would remain on hold.

Key economic indicators have been pulling the RBA in different directions, which may explain why it decided neither to loosen nor tighten monetary policy.

On the one hand, economic growth is running below trend, after growing just 0.2 per cent over the June quarter and 2 per cent over the year, according to the Australian Bureau of Statistics.

On the other hand, property prices are still surging in Australia’s two biggest cities, with Sydney prices growing 16.7 per cent during the year to September and Melbourne prices growing 14.2 per cent, according to CoreLogic RP Data.

The consensus view is that rates will remain on hold for the rest of 2015 – that was the forecast made by 29 of the 31 survey respondents, with the other two expecting a rate cut next month.

However, it is all but inevitable that rates will start rising again at some point. According to the survey, 60 per cent of respondents believe the first cash rate increase will occur in 2016, while 40 per cent believe it will happen no sooner than 2017.

The RBA has cut rates twice this year – from 2.5 per cent to 2.25 per cent in February and then to 2 per cent in May.

[Related: Interest rates tipped to fall to 1.5%]

 

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