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RBA rate kept at 1.50% for April

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Slow wage growth keeps RBA Rate at 1.50%

The Reserve Bank has maintained the official cash rate at 1.50% for the month of April 2018. The RBA last cut the cash rate in August 2016, following an earlier cut to 1.75 per cent in May. There has not been an official cash rate increase since November 2010.

Experts suggest that due to slow growth in wages as well as the sluggish housing market, we won’t likely be seeing a rise in the official cash rate until 2019 at least. Despite this, the job market continues to grow and mortgage rates remain low – especially for owner occupiers who tend to pay both their interest and principal amounts.

Gradual progress to reduce unemployment and maintain inflation targets is also expected. While unemployment has declined over the past year, it has been steady around 5.5% over the past six months. A significant rise in labour force participation, particularly by women and older Australians, had contributed to the recent stabilisation in the unemployment rate despite “strong growth in employment”.

Higher levels of public infrastructure investment, along with an expectation of “stronger growth in exports”, are two factors that would help to underpin Australia’s GDP growth. However, household income has been growing slowly and debt levels are high.

Governor Philip Lowe has stated that “A number of advanced economies are growing at an above-trend rate and unemployment rates are low. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth.”

“Globally, inflation remains low, although it has increased in some economies and further increases are expected given the tight labour markets. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus and further steps in this direction are expected.”

For the official RBA article, please visit the Reserve Bank’s website.