Interest Rate Update – April 2015

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The Reserve Bank of Australia (RBA) has announced it will maintain the official cash rate at 2.25%.

Following last month’s RBA decision to leave the cash rate as is “for the time being” it has again decided to await more financial data before it decides on further action to try to boost the domestic economy. The next quarterly inflation figures are due to be released at the end of this month together with another full round of monthly data. The RBA will then be able to digest this information in order to understand both the impact of the February rate cut and the falling iron ore price before another cash rate reduction, possibly in May.

Cash Rate Update – December 2014

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The Reserve Bank of Australia (RBA) has announced it will maintain the official cash rate at 2.50%, marking the first full calendar year on record without adjustment.

Australia’s economic outlook has not changed significantly over the past month and despite the slump in the dollar in November the TD Securities/Melbourne Institute monthly inflation gauge rose just 0.1%, as increases in the price of fruit and vegetables were offset by lower commodity prices.

The global economy outlook has also seen little variation over this recent period. The US economy is recovering, albeit very slowly. Chinese economic growth is modest and much of Europe continues to be of concern with high unemployment and a looming risk of deflation. The unstable situation in Eastern Ukraine together with the efforts to combat ISIS in Iraq and Syria continue to pose threats to the recovery of the world economy.

It is clear that the RBA will prefer to wait for positive signals on the domestic and global outlook before raising the cash rate, an outcome not expected until the second half of 2015.

Cash Rate Update – October 2014

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The Reserve Bank of Australia (RBA) has announced it will maintain the official cash rate at 2.50%.

Since the RBA’s last meeting the domestic economy has seen a decline in the Australian dollar due to a continued reduction in commodity prices and strength in the US dollar. If the lower Australian dollar is sustained it should support our non-mining exports however, notwithstanding a strong housing related market, the Australian economy overall remains soft. With inflation under control and a global economy not growing as quickly as expected the RBA will most likely remain on the sidelines for another 6 – 12 months.

Cash Rate – No Change

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The Reserve Bank of Australia (RBA) has announced it will maintain the official cash rate at 2.50%.

Most Economists are now forecasting this period of interest rate stability to continue until mid-2015, notwithstanding an improvement in business confidence, as measured by a recent Dun & Bradstreet survey of 800 businesses in Australia. 40% of the surveyed businesses are expecting their profit in the final quarter of 2014 to be higher than in the same period a year ago. Just 11% are expecting their profits to fall. Business in the retail, services, finance and real estate sectors are the most optimistic about the next three months whilst those in the manufacturing, construction, transport and utilities sectors still expect their profits to reduce.

Interestingly, the survey showed an increase in the number of businesses expecting prices to moderate, meaning less pressure on the RBA to increase the cash rate and supporting the Economist’s expectations of no change to the cash rate for many months.