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RBA set to break record for the longest period ever without moving rates

RBA set to break record for the longest period ever without moving rates

The RBA is expected to leave rates on hold when it meets this Tuesday – the longest stretch in history without adjusting the official cash rate.

Next week’s meeting will mark the 18th time the RBA has met without changing rates, which have been in a holding pattern at 1.50 per cent since the last rate cut on 3 August 2016.

The previous record of 17 meetings with no change was set 22 years ago, between February 1995 and July 1996. The cash rate back then was 7.50 per cent.

RateCity’s spokesperson Sally Tindall said the RBA board was set to blow the old record out of the water.

“The record might be set, but the end isn’t near. The Australian economy is stuck in neutral and Governor Philip Lowe’s hands are tied.

“The stalling of the long-awaited company tax cut is the latest thorn in the RBA’s side. The government’s claim the tax cut will result in better paid jobs, one of the key drivers for a rate rise, won’t materialise until after May, if at all.

“Eighteen meetings with the cash rate unchanged will be one for next week’s history books.

“Eighteen meetings with the cash rate unchanged at record lows, is one for Australian homeowners.

“While cost of living pressures, including escalating house prices, have squeezed the family budgets in recent years, many families have found a silver lining in interest rates.

“What home owners shouldn’t lose sight of are long term trends. History tells us rates will rise, which means now is the best time to start knocking off extra debt, to give yourself a buffer when the tide does eventually turn,” she said.

THEN

(1995-1996)

NOW

(2017 – 2018)

Cash rate

7.50%

1.50%

Av. mortgage rate

9.75%

5.20%

Inflation

3.10%

1.90%

Average mortgage size

$99,200

$389,000

Sources:

Mortgage rate is based on the average standard variable rate for an owner occupier, July 1996 and Feb 2018, source: RBA

CPI data is from June quarter 1996, Dec quarter 2017, source: ABS

Average mortgage is based on results from July 1996 and Jan 2018, ABS.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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