RBA holds, dollar soars, bonds dumped!

The Reserve Bank of Australia (RBA) has released its April policy meeting result and has elected to hold:

At its meeting today, the Board decided to leave the cash rate unchanged at 2.25 per cent.

Moderate growth in the global economy is expected in 2015, with the US economy continuing to strengthen, even as China’s growth slows a little from last year’s outcome.

Commodity prices have declined over the past year, in some cases sharply. The price of oil in particular is much lower than it was a year ago. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global output and temporarily to lower CPI inflation rates. Prices for key Australian exports have also been falling and therefore Australia’s terms of trade are continuing to decline.

Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns at all-time lows. Financing costs for creditworthy borrowers remain remarkably low.

In Australia the available information suggests that growth is continuing at a below-trend pace, with overall domestic demand growth quite weak as business capital expenditure falls. As a result, the unemployment rate has gradually moved higher over the past year. The economy is likely to be operating with a degree of spare capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate.

Credit is recording moderate growth overall. Growth in lending to investors in housing assets is stronger than to owner-occupiers, though neither appears to be picking up further at present. Lending to businesses, on the other hand, has been strengthening recently. Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities. The Bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.

The Australian dollar has declined noticeably against a rising US dollar over the past year, though less so against a basket of currencies. Further depreciation seems likely, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.

At today’s meeting the Board judged that it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will continue to assess the case for such action at forthcoming meetings.

Dollar took off 1.2%, bonds were heavily bid going in then got whiplashed coming out.


  1. My three year old picked it. Any cuts on hold until after impact of May budget properly understood

    • May budget? How about the effect of the cuts themselves?
      The more they cut, the less I spend.
      While they go off chasing unicorn animal spirits in the business world, the rest of us look at our increasingly worthless local money and start thinking about buying gold bricks.
      The cost of living is actually going nuts here… that CPI number means less than nothing.
      The more expensive shit gets, the more I scrimp, buy online or wait till I’m overseas.

      How can any of that be good for the Australian economy?

  2. Easy money! Longed 10 contracts AUD/USD. I knew Glenn couldn’t pull the trigger – he didn’t want the house of cards to come down on his watch.

  3. And no stricter lending rules on RE investment because, you guessed it, the RBA members as well as most pollies are balls deep in IPs themselves 🙄

    Foxes in charge of the hen house.

  4. Jake GittesMEMBER

    Their preferred option is fence sitting: it’s the only way to make smug statements, after pondering all the options over full cycle etc…

  5. 7 seconds early again. Wtf is this bullshit man, why is no one being prosecuted over this

      • @footsore – major move in the AUD happened 7 seconds before the announcement. Last month it was approximately 30 seconds before. Both times the markets were heavily priced in for cuts. Easy dodgy money for someone out there in Martin Place

    • @Jim

      I suspect it is just a case of sloppy IT … the rates decision page URLs have a clear pattern. If they are up in the server prior, they could be accessible. A much better way to do this is to use a partial random string and then the only to access this will be via the link.

      • “A much better way to do this is to use a partial random string and then the only to access this will be via the link.”

        Or configure the server to deny access until the exact release time.

  6. “The Bank is working with other regulators to assess and contain risks that may arise from the housing market”
    How about legal Jingle Mail to GS personally and no negatives on one’s credit rating?

  7. StomperMEMBER

    “The Bank is working with other regulators to assess and contain risks that may arise from the housing market.”

    In other words – watching the horse as it runs off down the road.
    What an incompetent bunch of weasels….

      • StomperMEMBER

        @flawse – I know – and I shouldn’t let it bother me – but when I see the mess that will be left it makes me mad as hell

    • LOL watching the horse as it runs off down the road.

      Horse well and truely bolted.

  8. “treading water is the same as drowning, for people like you and me….good luck, I’ll be watching”
    Frank Underwood

  9. Maybe they realized that cutting interest rates is not going to bring the “animal spirits” back to the market.. We’re screwed regardless of what they do.

  10. The Patrician

    More delphic mumblings from Glenn.
    Where are the clear unambiguous statements from our RBA Governor to our Treasurer on the urgent need for real MP? FIRB enforcement? NG for new builds only?
    Sack the dud.
    Hire Wheeler.

    • Nash, they’re just keeping their powder dry so they can spread the prosperity and enriching of the very clever out over a longer time frame. Plus, this will give rents some time to catch up to the beautiful house price (aka wealth) gains of the last 2 years.

      It’s all win; they’re not going to go all commie on us and raise rates. That would stop clever investors from making more money, and we all know that’s the very definition of soshulism!

  11. +1 to spleen up there.

    I felt there would be a hold on rates primarily due to media coverage of sydneys / melb bubble.

    Looking to reload shorts once again…

  12. What economic conditions dictate 2.25 per cent as too high? Ours, speeding toward a brick wall.

    In more normal times, the RBA would call on the federal government to spend, but the L/NP coalition is in an induced coma hoping their standing recovers (it won’t, which leaves us without a captain, however Queeg-like, or even anyone to work the pumps).

    Ex-Sydney and Melbourne, land prices are falling, the CAUSE of economic downturns. Phillip Anderson suggests watching the REITs for the smart money pulling out. He has a point.

    Don’t Buy Now!

    • David,
      yet according to Phillip Anderson we are only in the early stages of a boom. His words from 2014:
      “At this stage in this particular cycle, the outlook is bright for property. By 2018, we expect the market to be humming along nicely, with the woes of 2008 firmly behind us. By 2024, we’ll have hit the ‘winner’s curse’ phase, which is when early investors should be ready to get out of the market – it’s certainly not the time to take on lots of debt to buy a property. Then in 2025/2026, we’ll see a peak in the property market – the latest ‘tallest building in the world’ might well open that year – followed by a significant crash”.

      The ‘don’t buy now’ message appears to be in conflict with Phil’s quote from 2014. I’m not point scoring here (I’ve been in dbn since forever). Has he shifted?

  13. Guys, you have to get your money into gold. Had a few beers with mates recently returned from the Miami (gold coast) gold traders. They had many 5 oz bars. and grins from ear to ear.
    They are out fishing today, apparently the snapper are running, and the tourists have gone home. WW

  14. alterbrainMEMBER

    I didn’t go long but I stayed out of the market. “Deer in the Headlights” comes to mind.

  15. Milton Friedman is having a belly laugh with his pal L. Ron Hubbard in another plain of existence.