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The Reserve Bank has today revealed the outcome of its monthly board meeting, after persisting with a record lower-for-longer environment.
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.
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.
What does this mean for my mortgage?
Banks and lenders have been moving their rates out of cycle with the RBA in recent months, leaving investors wondering if interest rates on their mortgages could still rise despite a "hold" decision.
Mr Eslake believes that, for now, those fears are largely unfounded.
“The most recent round of out of cycle rates increases was a response in part to increases in the cost of the money they raised from overseas, particularly in the United States, and there could be more pressure on that front over the year or so ahead,” Mr Eslake said to Smart Property Investment earlier this week.
“I don’t think we will see too much more of that [rate changes by the banks] until the Reserve Bank starts lifting its cash rates, which we agree is quite a long time away.”
More to come.