RBA bets safe, leaves rates on hold

Gladys Abbott
November 8, 2017

Meanwhile, Australia's central bank left interest rates at a record low today after mixed signals from the domestic economy in recent weeks.

Sydney's quarterly decline was the first rolling quarterly fall in dwelling values since May 2016, when the first round of macro-prudential reforms were still working their way through credit policies, and home loan rates were only just beginning to drop in line with the first cut to the cash rate.

Reserve Bank of Australia governor Philip Lowe said the board expected the current low rate of inflation to gradually lift as economic growth improved.

Meanwhile, the greenback remained supported after mostly positive USA data released late last week added to expectations for a rate hike by the Federal Reserve.

The Australian dollar rose to a two-day high of 76.95 United States cents following the RBA's rate announcement, though quickly fell back and ended the local session at 76.80 USA cents.

Australia's statistician announced a reweighting of the consumer price basket this week that will lower inflation levels further, making it harder for the consumer prices to rise at the pace now forecast.

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Increased public infrastructure investment is also supporting the economy.

But third quarter inflation data was slightly below expectations and September retail sales came in weak.

Capital Economics' economist Paul Dales said if GDP growth and underlying inflation stay below 3 percent and 2 percent respectively next year, then the RBA probably won't raise interest rates until late in 2019.

The unemployment rate has also fallen to 5.5%.

"One continuing source of uncertainty is the outlook for household consumption", Dr Lowe said in a statement on Tuesday.

But with borrowing for houses still outstripping incomes growth by a significant margin, fears about growing financial instability in the property market are unlikely to ease much.

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