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Cash Rate June 2017

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Cash Rate June 2017

As many have speculated, the Reserve Bank of Australia (RBA) has decided to leave the official cash rate unchanged for June 2017 at 1.50%. This news may come to no surprise to the public in line with the rate remaining stagnant for over 6 months. This familiar trend has established itself due to many factors, ranging from housing market trends to inflation prospects for the country.

The housing market hosts a variety of notable trends; it continues to rise and fall in different parts of the country. Growth in housing debt has outpaced that of household income, which has been strengthened by measures introduced by APRA to address the risks associated with high and rising levels of indebtedness.

Tim Lawless (head of CoreLogic research) states that “one of the key barriers to rate cuts — the hot housing markets of Sydney and Melbourne — have shown signs of slowing.” “If this ... develops into a more sustained trend, the RBA may be able to consider alternative scenarios to a steady cash rate. A longer trend of slowing value growth and overall softer housing conditions will lend further support to the notion that house price growth has moved through its cyclical peak.”

Labour market indicators are also mixed, with the unemployment rate falling and the employment rate growing slightly stronger. These trends are expected to remain in line over the course of the next few months. Growth in consumption is expected to stay moderate and broadly in proportion with incomes.

However, there are growing signs a rate cut could be expected in the near future. Financial markets are starting to lean more towards a reduction in official interest rates rather than a stable rate setting. “Taking account of the available information, the board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time,” RBA Governor Philip Lowe said.

If you have any questions about how this may affect you, please get in touch today.