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RBA's seven-year itch set to continue on Tuesday

RBA's seven-year itch set to continue on Tuesday

The Reserve Bank is set to leave interest rates unchanged again when it meets next Tuesday, according to an analysis of 23 leading economic indicators.

RateCity’s ‘Rate Forecaster’ (see bottom) found that 21 of the 23 indicators suggested the RBA would leave the official cash rate at a record-low 1.50 per cent, where it has been since August 2016.

It’s now been seven years since the Reserve Bank lifted the official cash rate, with the last upwards movement occurring in November 2010.

RateCity money editor Sally Tindall said it is unlikely the RBA will hike rates anytime soon.

“It’s incredible to think there is a now a large number of first home buyers who’ve never experienced a rate hike. Seven years is a long time between increases,” she said.

“However, when the RBA meets on Tuesday there is currently no strong case to move official interest rates.”

RBA’s “hands are tied”

RateCity’s analysis of official data shows there has been little change in GDP, unemployment, construction, auction clearance rates and retail sales figures.

“Lower-than-expected inflation figures and wage growth stalling at just 1.9 per cent provide an argument for the Reserve to cut rates, but that’s unlikely,” Ms Tindall said.

“The RBA will also be concerned Australia’s household debt-to-income level increased from 190.0 per cent to a record 193.7 per cent in the last quarter – a worrying trend that that leaves them in a difficult position.

“If they hike rates, they will risk sending thousands of Australians into financial hardship. Conversely, if they lower rates, it will encourage others to take on more debt.

“In short, their hands are tied until wages growth, and the broader economy, strengthen.

“Until then, home owners can rest easy in the knowledge that their mortgage repayments won’t be increasing anytime soon,” said Ms Tindall.


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