February 7, 2018 Only Estate Agents

RBA rate stays unchanged

The cash rate has officially been placed on hold at a record low 1.5 % at the first meeting of the year for The Reserve Bank of Australia, ongoing worries regarding weak household consumption seems to have been the defining factor and continuing source of uncertainty with household incomes growing slowly and high debt levels.

Gross domestic product growth has been forecasted by The central bank to pick up to average a bit above 3 percent over the next two years based on consistent statistics over the summer.

Business conditions were encouraging and the outlook for non-mining investment had improved, while increased public infrastructure investment was also supporting the economy.

“The low level of interest rates is continuing to support the Australian economy,” governor Philip Lowe said in a statement on Tuesday.

“Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.”

Earlier on Tuesday, statistics showed retail sales alleviated more than expected in December after a whistle-stop couple of months, but still posted a clever rebound in the concluding quarter of 2017 in a positive sign for household consumption and economic growth.

Consumer expenditure has been under pressure from record-high household debt and slow wage growth, one reason the RBA has been in no rush to raise interest rates.

The Australian dollar, already losing ground after the worse than expected retail and international trade data, fell following the RBA’s decision and was at 78.61 US cents at 1437 AEDT, from 78.73 US cents ahead of the announcement.

Retail sales eased 0.5 per cent in December, Australian Bureau of Statistics figures showed, from November when they heightened a great 1.3 per cent, led by Black Friday discounts. Economists polled by Reuters had predicted a 0.2 per cent fall.

The withdrawal in part reflected the influence of online discounting events in November, which brought expenditure forward. Online sales grew 6 per cent in original terms in December, after jumping 20 per cent in November.

Household goods led the falls with department stores, clothing, footwear, cafes and restaurants all posting losses.

For the final quarter as a whole, retail sales exceeded expectations to rise a rapid 0.9 per cent in inflation-adjusted terms. That followed a very sedate 0.1 per cent gain the prior quarter.

A survey of 25 of Australia’s leading economists this week forecast interest rates would go up by the end of this year, with the average bet seeing the official cash rate at 1.7 per cent by December.

In the Scope Business day economic survey 2.25 per cent was the maximum cash rate predicted to be reached by December, 1 per cent being the lowest prediction.

Source: www.thesydneymorningherald.com.au