The cash rate was left at 0.75% for November as one aggregator sees a positive outlook
The Reserve Bank of Australia may have done enough to help boost consumer confidence and positive signs for the economy may allow for a break in rate cuts, according to one aggregator.
The RBA left the cash rate at the record low of 0.75% yesterday (November 5), despite Governor Philip Lowe saying little had changed in terms of the outlook for the Australian economy in the last three months.
Finsure managing director John Kolenda said that while the retail sales figures for September were disappointing, the low rates should help with consumer confidence.
“Having confident consumers is a major contributor to an economic turnaround and the domestic economy is still showing signs of improvement,” Kolenda said.
He also pointed to the push by the federal government to relax lending standards for SMEs: “It is good to see the government talking to the banks about the way they have been applying the responsible lending guidelines to small and medium-sized enterprises. By supporting more lending and our SMEs we should see positive signs of further economic improvement.
“In this environment there is no real need for the RBA to do much more until they get a better view of the economy into the first quarter of next year.
“It will be good to see consumers break the shackles and start spending again in the lead up to Christmas. Hopefully the central bank’s rate reductions have helped give consumer confidence a boost.”
CoreLogic’s research director Tim Lawless is less certain of consumer confidence, saying that one of the negative side effects of historically low interest rates is that Australian households become less confident about their finances and the economy.
Lawless had predicted the RBA would hold rates as it runs out of “conventional monetary policy ammunition”.
He said the decision was supported by the latest labour market and inflation readings, which saw the national unemployment rate reduce, while annual headline inflation edged higher.
“Additionally, a rebound in housing values and a rise in buyer activity will hopefully begin to flow through to a gradual improvement in household wealth and spending,” he said.
“No doubt the lowest mortgage rates since at least the 1950’s and improved access to credit following APRA’s decision to adjust the interest rate serviceability floor are contributing to a rebound in housing market conditions,” he added.
“While the improved housing market conditions are a positive for broader economic conditions, an increase in speculative activity from property investors or a slip in the quality of lending standards could be the trigger for a new round of macro-prudential policies aimed at maintaining prudent lending standards and keeping a lid on further accrual of housing related debt.”
