RBA: Was it right to sit tight?

by Caroline Dann08 Aug 2012

While it surprised very few, the RBA's decision yesterday to sit tight on a 3.5% rate has the industry divided on whether it was right to do so.

The Housing Industry Association (HIA) said mounting evidence, showing a deterioration in new home builds, was a key reason why rates should come down.
"[The decision] doesn’t provide any solace to a home building industry that faces the prospect of further deterioration in activity from existing weak levels," said HIA's senior economist Andrew Harvey.
"This will mean a substantial level of underemployment within the residential building industry, and, unlike theoretical models of the economy, not all of these workers can pick up sticks and move to mining areas in Western Australia.” 
Both Mortgage Choice and Loan Market agreed the unchanged rate gave the RBA "ammunition up its sleeve" should the Australian economy deteriorate.
"Soft inflation figures released this month show the Reserve Bank still has room to move should our domestic economy lose balance or the situation in Europe worsen,” said Mortgage Choice's Belinda Williamson.
Big projections aside, some are arguing the unchanged rate is good news for the beleaguered fixed rate loan. 
Its popularity has nosedived recently as borrowers anticipated further cuts.

We want your opinion!

Was the RBA right to keep the cash rate unchanged? Leave your comment below.


  • by John Black 8/08/2012 10:30:09 AM

    I talk to a lot of people and most of them are doing it really tough at the moment especially those SME's connected with real estate, construction both commercial and residential, mortgage and finance brokers, manufacturing and the retail sector. Rates may be lower than they were but the economy apart from the mining sector is flat and I cannot understand how the powers that be cannot acknowledge just how much hurt exists in the economy at large. Rates need to come down significantly as parts of our economy are in recession currently.

  • by Opinion WA 8/08/2012 10:36:37 AM

    Let's be honest would the HIA ever come out and say building levels were satisfactory?

  • by Tim 8/08/2012 11:11:34 AM

    Apart from the period from February 2009 to December 2009 when the GFC was most seriously affecting us the Reserve Bank cash rate is at the lowest it has been in the last 22 years. So the Reserve Bank seem to be doing their bit to try and stimulate activity.
    If the HIA and other similar groups want to get more activity happening then maybe they should start talking things up and focus on this positive aspect of low interest rates for one.
    Like your correspondent from WA I too think the HIA need to change their attitude. We need confidence to increase in the economy to get things happening again and the HIA are just one group that could lead this push.