At its monthly meeting on Tuesday, the Reserve Bank Board decided to leave the cash rate unchanged at 0.75 per cent. This follows the 3 recent decreases of 0.25% in June, July, and October.
The RBA believes the Australian economy has reached what it has termed a “gentle turning point” and it believes growth will gradually pick up to around 3 per cent in 2021.
The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices and an improved outlook for the resources sector should all support this forecast increase in growth.
The downward pressure on the exchange rate from the lowered cash rate has also supported activity in various industries, and boosted asset prices which, together with lower mortgage rates leaving more disposal income for households, should flow through to increased spending.
In summary the Board will give the previous rate cuts more time to work given the lead time for the reductions to take effect and will continue to monitor developments, including in the labour market. It acknowledges that given global and domestic factors, an extended period of low interest rates will reasonably be required to reach full employment and achieve the inflation target. However, it is prepared to reduce the cash rate further to achieve these goals and support sustained growth.
The full statement supporting the decision by Philip Lowe, Governor of the RBA, can be found here.
For more information please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au