RBA makes interest rate announcement

by Julia Corderoy07 Jul 2015
The Reserve Bank has left the cash rate on hold for the second consecutive month, since cutting it by 25 basis points to 2% in May.

The latest monthly Reserve Bank Survey, conducted by finder.com.au, found that all 33 experts and economists on the panel unanimously predicted the cash rate would remain on hold today.

According to Mortgage Choice chief executive, John Flavell, the Reserve Bank’s decision would have weighed in the Sydney and Melbourne’s heated housing markets. Recent research conducted by CoreLogic RP Data shows property values continued to climb in both Sydney and Melbourne throughout the month of June, with prices rising by 2.8% and 2.9% respectively. 

“Strong property price growth in Sydney and Melbourne combined with growing problems abroad has encouraged the Reserve Bank of Australia to leave the cash rate on hold,” Flavell said.

“What makes this growth even more impressive is that it comes at a time when many of Australia’s lenders have started to tighten their investment lending policies. If rates were cut, property prices could climb even further – a fact the Reserve Bank is acutely aware of. 

“As such, it makes sense for them to leave rates on hold and hope that the changes being made by the banks to investment lending policies will be enough to help slow investor demand and property price growth in both Sydney and Melbourne.”

Greece’s worsening economic outlook would have also played a part in the Reserve Bank’s decision to keep the cash rate on hold this month, says Flavell.

“Following Greece’s ‘no’ vote at its referendum, the Australian dollar plummeted, hitting its lowest level since 2009. With this in mind, there is no immediate reason for the Reserve Bank to cut rates.”