The RBA cash rate call: Where do we stand?

by Miklos Bolza07 Mar 2017
With the board of the Reserve Bank of Australia (RBA) due to make their monthly official cash rate decision today, the nation’s economic experts have widely predicted the rate will hold.

All 38 of finder.com.au’s panel of resident rate experts plus all 24 economists surveyed by Bloomberg have predicted the RBA will keep the cash rate at 1.5% continuing a six-month long hold streak.

One of the panelists, Lynne Jordan, general manager of risk at Liberty Financial, said that continued growth in house prices, high property clearance rates and an increase in property investors has brought the topic of housing affordability back into the spotlight.

“Although increasing interest rates could help dampen investor activity and slow the market, inflation needs to pick up – likely driven by fiscal stimulus in the US – before the RBA can do anything.”

Another panelist, Jessica Darnbrough, head of corporate affairs at Mortgage Choice, said that the RBA would be keen on observing any further changes in both domestic and global markets before making any changes to Australia’s current monetary policy setting.

“We know that Reserve Bank governor Philip Lowe believes lower rates could cause household debt to rise further, which is something he wants to avoid. As such, we are unlikely to see the RBA trim the cash rate at this meeting.”

In a cross-sectional survey of over 300 brokers, mortgage marketplace HashChing found that more than 97% of its brokers predicted the cash rate would be left on hold at 1.5% this month.

Over 69% of brokers believe the cash rate has hit its lowest point in the cycle while the remainder predict the RBA will cut the rate even further. The majority of those surveyed believe the cash rate will increase as of June this year.

There is a 59% probability of a hold call this month, said chair of the RBA Shadow Board at the Australian National University (ANU), Dr Timo Henckel.

“Stronger than expected economic growth provides welcome news to the Australian people. Coupled with a lack of new data on inflation, the unemployment rate hardly moving and no clear direction for the global economy, the RBA Shadow Board believes the cash rate should remain unchanged.”

However, this probability had trended downwards from 70% in February with the Shadow Board saying there was only a 23% likelihood that the cash rate would remain unchanged over the next six months.

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