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RBA announces its December cash rate call

04 December 2018 Tim Neary
RBA

The Reserve Bank announced its cash rate decision for the month of December, set against a backdrop of a property market that continues to cool despite record low rates.

As widely anticipated, the RBA has left the official cash rate on hold at 1.5 per cent.

Australia’s top economists and market commentators were united in predicting another hold, including Leanne Pilkington, managing director at Laing+Simmons, who said that increasing it now would have been unwise. 

“Subdued housing transaction activity and price declines in some markets make an interest rate increase in the near term an unnecessary risk,” the MD said. 

“A strong labour market will be a key factor supporting the economy as we look to the new year.”

Economist Saul Eslake held a similar view, saying that an increase is still some way off.

“Some of [the RBA’s] recent commentary appears to indicate slightly greater near-term concerns with regard to the possible consequences of declining property prices and greater risk aversion on the part of lenders.

“Although the RBA remains optimistic on the outlook for economic growth and unemployment, it still sees inflation returning only ‘gradually’ to the bottom of its 2–3 per cent inflation target.”

Equally optimistic, chief economist at REA Group Nerida Conisbee also felt the RBA would hold rates as is — at least for the time being.

“There are some really positive economic indicators out there at the moment. In particular, the unemployment rate is very low and this should lead to wages growth.

“Nevertheless, at this stage, I believe they will hold and review when they meet up again next year.”

Head of corporate affairs at Mortgage Choice Jacqueline Dearle agreed that there is nothing in the market to prompt a change. 

“With little change in inflation and wage growth, plus a positive outlook for the labour market, the economic backdrop suggests the Reserve Bank of Australia will hold the official cash rate at 1.5 per cent in December,” Ms Dearle said.

RBA announces its December cash rate call
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