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RBA delivers December cash rate call

By Reporter 07 December 2021 | 1 minute read

For the last time in 2021, the Reserve Bank of Australia has handed down its decision on the cash rate.

The board has decided to maintain the cash rate at its record-low 0.1 per cent – which has now stood for the entirety of 2021 and is now set to be maintained until at least February 2022.

Weighing in on today’s decision, CreditorWatch chief economist Harley Dale said, “Maybe they have a Christmas tree in the corner of the room because the RBA hasn’t shaken many trees in its final 2021 stanza.”

He called this latest decision as occurring “in a predictable fashion”.

“The OCR has stood there since November 2020 when the Bank cut the rate by 15 basis points,” Mr Dale said.

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Mr Dale noted that the Australian economy is emerging from an extensive lockdown period, although restrictions continue to vary and move around.

From his perspective, “there is still uncertainty out there for households and businesses”.

While November may represent the first month when Australia was over substantial lockdowns, Mr Dale said that at this stage, little data reflects this, or Australia’s ability to recover.

The chief economist has warned that economic recovery post-COVID-19 “won’t happen anywhere near close to a straight line”.

“A recovery never does, but now more so than ever,” Mr Dale said.

He mused that “the RBA may well be contemplating the prospect of interest rates rising sooner than officially conveyed for such a long time now, but they seem happy to play Santa for now”.

With so much discourse around Australia’s economic recovery, RBA’s decision-making and external market pressures – especially in the property space – Mr Dale said “conjecture regarding when the RBA will move is only going to escalate in 2022.”

From his point of view, “that in and of itself is not helpful for household and, especially business confidence.”

“In such a dynamic economic environment, early February 2022 is a long way off,” Mr Dale added.

“The first meeting of the RBA board next year will convene with considerably more information regarding the economic environment post June – October of this year. That statement at the very beginning of February may set tongues wagging.”

Mr Dale’s comments do come after Dr Andrew Wilson’s recent rubbishing of claims that there would be a sharp increase to interest rates in the coming 12-24 months.

The consultant economist at Bluestone Home Loans was responding to the Commonwealth Bank’s forecast of a 10 per cent drop in property prices when he made the comments.  

While acknowledging that the market will soften in 2022 – due to rising affordability barriers and lower demand – Dr Wilson iterated that the RBA itself had outlined expectations for the cash rate to remain at the current level until 2024, based on the central bank’s wage rise requirements and inflation targeting.

“For wages growth to meet the RBA requirements for a rate rise by November 2022 – the date predicted by those forecasting record price falls in 2023 – would require an unprecedented surge in incomes over coming months,” he said.



RBA delivers December cash rate call
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