The Reserve Bank has announced its cash rate decision for April, as budget 2019 night nears and the country anticipates a range of tax breaks and the first surplus budget in 12 years.
As widely anticipated, the RBA has left the official cash rate on hold at 1.5 per cent.
Most of Australia’s top economists and market commentators were united in predicting another hold, including Leanne Pilkington, managing director at Laing+Simmons, who said that there’s still no trigger significant enough to warrant an adjustment to the cash rate.
“Labor’s proposed changes to negative gearing and CGT have the potential to impact the market considerably, so we see the RBA leaving rates steady at least until the federal election result is decided.”
Head of corporate affairs at Mortgage Choice Jacqueline Dearle correctly predicted the RBA’s hold this month, saying that despite unemployment remaining low, wages remain low and there has been subdued growth in the Australian economy.
“In addition, we are now experiencing a ‘per-capita’ recession for the first time in 13 years which may prolong soft household spending,” Ms Dearle said.
“These economic factors, plus a decline in dwelling investment driven by the tightened lending environment, will also be weighing on RBA decision-making.”
AMP economist Shane Oliver said that while the threat to growth and inflation from the housing downturn is such that the RBA should have cut rates today, it was always likely to have held.
“The RBA probably needs to see more evidence that the slowdown seen in the second half last year is not just temporary, that consumer spending is under serious threat and that this will drive higher unemployment and lower for longer inflation,” he said.
“It will probably also want to see what sort of fiscal stimulus comes out of the budget and the federal election outcome. Rate cuts are probably still several months off.”
Chief economist at REA Group, Nerida Conisbee, said that while the likelihood of a cut is increasing, this month is still too early.
“If economic data continues to deteriorate, then we will likely see movement in the second half of the year,” Ms Conisbee said.
“Despite a slight softening, the economy is in relatively good shape, [and] as evidenced by falling unemployment rates, this will see the RBA hold the cash rate steady this month.”
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