RBA ends the year with a “hold” on the cash rate

Tue, 5 Dec 2017

To no one's surprise, the Reserve Bank of Australia held the cash rate at 1.50% on their last meeting of the year.

The Reserve Bank of Australia has held the cash rate at 1.50% at their December 5 meeting. This is the 15th consecutive month the RBA has held the cash rate, after cutting to the historic low of 1.50% in August 2016.

Once again the RBA's result was correctly predicted by 100% of the experts polled in the monthly finder Reserve Bank Survey.

In a statement following the meeting, the bank explained its decision to hold the cash rate in light of the global economy's recovery, but reiterated that "growth in housing debt has been outpacing the slow growth in household income for some time." The bank also mentioned the effects of APRA's supervisory measures.

There are plenty of reasons for the RBA to leave the cash rate where it is. Overall house prices were flat in November and Sydney has seen a drop in prices over the last few months. Rates can't really get much lower than where they are and tightening restrictions on interest only and investment lending currently make it harder to get those types of loans. This effect is similar to a rate rise in some respects.

And with mortgage debt a major cause of stress in Australian households, a rise in the cash rate could have troubling effects on Australian borrowers.

The Reserve Bank doesn't meet in January, so the bank will make its next cash rate decision on 6 February 2018.