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The Reserve Bank has this afternoon made its cash rate call for the month of November, against a backdrop of record rate lows and a softening housing market.
As widely predicted, the RBA has today left the official cash rate on hold at 1.5 per cent.
Australia’s top economists were unanimous in predicting another hold, including ING Direct’s Michael Witts, who said there are no triggers in Australia which would require a move.
LJ Hooker’s Matthew Tiller similarly said there was no economic imperative for the RBA to move cash rates.
“There was no discernible change in domestic economic indicators over the past month, ensuring that the RBA will hold the cash rate steady in November,” he said.
“A number of global economic developments may yet have an impact on the outlook for the Australian economy. That’s said, there is little chance of a change in the official cash rate in the short term, especially given the ongoing soft inflation numbers and the slowdown in the housing market; due to higher interest rates and tighter lending restrictions by the banks,” he said.
Others, like Saul Eslake, pointed to patterns in employment which will continue to inform the RBA’s decisions.
“Although most recently reported economic growth figures were above trend, and unemployment rate is 5 per cent - the level traditionally regarded as signifying full employment - the above trend growth is unlikely to be sustained in the near-term, the unemployment figure was probably rogue, there is still a lot of spare capacity in the labour market by other measures,” Mr Eslake said.
“The RBA itself has started to wonder out loud that unemployment probably needs to be lower for longer than history suggests before wages growth starts to pick up - and, most importantly of all, the latest CPI data show underlying inflation still running below the RBA's target range,” he said.
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