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The Reserve Bank has announced its cash rate decision for May, as the federal election nears and the country’s political leaders ratchet up their squabble politicking into top gear.
As predicted, but not as fervently as in previous months, the RBA has held the official cash rate steady at 1.50 per cent.
Australia’s top economists and market commentators were divided on which way the RBA would lean today, but Leanne Pilkington, managing director at Laing+Simmons, got it spot-on.
She had felt the RBA would hold off on the now-anticipated cut, but said it was as close a call as the RBA has faced in recent times.
“The March quarter CPI figures were a bit of a shock, but we still see the hold pattern as the prudent course,” she said prior to the announcement, adding that a single rate cut takes time to wash through the system.
“And the economic situation is fluid, particularly given the upcoming election.”
Head of corporate affairs at Mortgage Choice Jacqueline Dearle also thought the RBA would hold off on its cut move until June, or even August.
“Cutting the cash rate could serve to stimulate the property market. However, history shows us that the RBA does not move the cash rate during an election campaign.”
Chief economist at REA Group Nerida Conisbee also had one eye on the election.
She had predicted an RBA rate hold, but said this month’s decision was a hard one to call.
“I’m going with hold, but I am not as confident as with my previous calls,” she said prior to the announcement.
“Inflation numbers are terrible but jobs still looking okay. Plus, there is an election coming up.”
Head of research at LJ Hooker Mathew Tiller was off target with his prediction, believing instead that the RBA would have moved to get ahead of softening employment data.
Mr Tiller said that access to finance is the vital cog in the machine if the housing market is to be stimulated, particularly right now, before the downturn can gain further momentum.
“It’s imperative that consumers and businesses are able to borrow, which they are finding difficult to do in the current environment,” Mr Tiller said.
AMP economist Shane Oliver also called it wrong, saying that weaker than expected underlying inflation in the March quarter argued the case for the RBA to cut now, rather than wait another month.
“Rate cuts [are] on the way, thanks to slower economic growth and the downturn in the housing cycle,” Mr Oliver said.
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