The Reserve Bank of Australia has announced it will keep the cash rate at the record low of 1.5 per cent.
The decision at Tuesday’s March meeting marks Australia’s longest period without a rate change. The RBA’s last cut was in August 2016 and despite economic growth slowing in the second half of 2018, it is expected that the Australian economy will grow by about 3 per cent this year.
A strong Australian labour market and further decline in the unemployment rate to 43/4 per cent over the next couple of years should result in a growth in wages over time.
“The growth outlook is being supported by rising business investment, higher levels of spending on public infrastructure and increased employment,” said governor Philip Lowe in his monetary policy decision statement.
“The main domestic uncertainty continues to be the strength of household consumption in the context of weak growth in household income and falling housing prices in some cities. A pick-up in growth in household income is nonetheless expected to support household spending over the next year.”
The statement also said that the continuing adjustment in the Sydney and Melbourne housing markets and a tightening of credit conditions for some borrowers has changed the dynamics of the housing market.
“The demand for credit by investors in the housing market has slowed noticeably,” the statement said.
“The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual”
The Board deemed that holding the cash rate at 1.5 per cent would be consistent with sustainable growth in the economy and attaining the inflation target over time.