As widely anticipated, the Reserve Bank of Australia has decided to keep the cash rate on hold at 1.50% for March 2018. All 22 economists polled by Bloomberg expect the cash rate to remain at 1.50%. This now marks 19 months in a row of this record low remaining in place.
Many investors do not envisage an increase in the rate until 2019, because of the crack-down on investors and interest-only lending, which has in turned slowed down the housing market. “Dwelling values in Sydney have reduced by 3.7 per cent since peaking in July last year and Melbourne vales are 0.4 per cent lower since peaking in November.”
Speaking at the A50 Australian Economic Forum dinner, Mr Lowe said that Australia does not need to “move in lock-step” with other countries like the US and UK, which have already begun raising rates.
Wage growth has been an area of particular interest, based on 2017’s final quarter increase for private sector workers. Yet, there are some reports that employers are finding it harder to hire the correct employees, in terms of their required skill sets.
Inflation is still low – both the CPI and underlying inflation are just under 2%. However this is forecasted to rise later in the year. Conversely, the unemployment rate has declined, as employment has been rising in all states
Additionally, the Reserve Bank believes that the Australia economy should see more growth in 2018, compared to that of 2017. This is due to numerous reasons, including the rise in non-mining business investment, growth in exports, increases in public infrastructure investment and strengthening overall business conditions.
“Higher on the RBA Board’s agenda is likely to be inflation and employment. Year ended inflation averaged just 1.9 per cent over 2017, and the unemployment rate was 5.5 per cent in January, up from 5.4 per cent in November last year.”
For the official RBA article, please visit the Reserve Bank’s website.