Official Cash Rate Stays On Hold

Hi All. Been busy in the new year with a rental property of mine as I have been getting it ready for a new tenant. You might say there has been issues with the current tenants. The real estate market in Australia appears to be entering interesting grounds. I think from what I have been reading the market will still be stable and has movement to grow which has been spurred with low interest rates. Talking about interest rates, I would like to report about the official cash rate which was announced recently. For those who aren't aware of what happened in Australia and in regards to our cash rate please read on what I discovered.

After a meeting of the RBA (Reserve Bank Of Australia) on the 5^th Feb 2013 the official cash rate remains unchanged at three per cent following a meeting of the Reserve Bank of Australia (RBA) today. Inflation is consistent with the medium-term target, with both headline CPI (Consumer Price Index) and underlying measures at around 2.25 per cent on the latest reading.

Factors such as inflation being contained (within the usual 3% upper limit), optimistic economic news coming out of the United States, Europe and China and a more robust housing market within Australia, are likely to have contributed to the RBA Board’s decision. Growth within Australia was close to trend in 2012, led by very large increases in capital spending in the resources sector, while some other sectors (e.g. retail) experienced weaker conditions. 

The majority of economists had tipped today’s decision but remain confident of further interest rate reductions throughout the rest of 2013. Some analysts are predicting within 2013 total cuts of up to 100 basis points.

Paul Smith of “ Loan Market” says despite today’s decision, some lenders may toy with the idea of making their own movements with interest rates. 

“With the cost of funds pressure easing for many lenders, there’s an opportunity for them to make adjustments to their variable rates in attempts to attract new customers,” Smith says.

“The action or inaction from lenders in the following weeks could be indicative of what’s in store for interest rate movements over the next several months.”

However whether the big four banks (aka pillars) will pass on interest rate adjustments to the consumer is anyone’s guess.