Steady interest rate to boost economy

Dollar, money, coinThe Reserve Bank of Australia has left the cash rate unchanged at 1.5 per cent for the 24th month in a row, noting that housing conditions in the nation’s two largest housing markets (Sydney and Melbourne) were easing as investors drop away.

RBA governor Philip Lowe noted that weak household spending remained a source of uncertainty for the economy, and was a driving factor in the decision to keep the official interest rate at its current record low.

According to Roy Morgan’s latest Australian consumer confidence report, weak household spending are a result of high levels of household debt and low savings rate, stymying future consumption growth.

Consumer confidence is down, per the report, despite the relatively stable economy described by the Commonwealth Bank, who noted the economy was in good shape with growth in infrastructure spending and a pick-up in business capital expenditure helping to balance out the slowing housing market.

“You look to the long term prospects and of course there have been some big shifts in the economy over recent years,” said CBA CEO Matt Comyn, “but we are seeing investments in infrastructure, we see good potential from just population growth and of course some of our Asian neighbours which will continue to drive a good focus on growth in the local Australian economy.”

The CBA noted that the market would remain in a positive position, being driven by population growth, improved employment levels and relatively stable interest rates.

ANZ’s Quick Reaction Australia release stated that the tone of the RBA’s release remained positive.

“The Bank continues to seem comfortable with the level of the exchange rate, noting that ‘the Australian dollar remains within the range that is has been in over the past two years’,” noted ANZ, adding that softer conditions in China had led to slowed growth.

“Not surprisingly, the direction of global trade policy continues to be a key source of uncertainty, but importantly, ‘financial conditions remain expansionary, although they are gradually becoming less so in some countries’.”

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