RBA holds cash rate at 1.5%

As expected, the RBA has left interest rates on hold. Here’s the statement from RBA governor Phil Lowe:

At its meeting today, the Board decided to leave the cash rate unchanged at 1.50 per cent.

The global economy has strengthened over the past year. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth. Globally, inflation remains low, although it has increased in some economies and further increases are expected given the tight labour markets. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus and further steps in this direction are expected.

Financial markets have been affected by political developments in the eurozone, particularly in Italy. There are also concerns about the direction of international trade policy in the United States and economic developments in a few emerging market economies. Long-term bond yields in most major economies have declined recently and there has been some widening of corporate credit spreads. Overall, though, financial conditions remain expansionary. Conditions in US dollar short-term money markets have eased recently, although they are tighter than earlier in the year, with US dollar short-term interest rates having increased for reasons other than the increase in the federal funds rate. The higher rates in the United States have flowed through to higher short-term interest rates in a few other countries, including Australia.

The price of oil has increased over recent months, as have the prices of some base metals. Australia’s terms of trade are expected to decline over the next few years, but remain at a relatively high level.

The recent data on the Australian economy have been consistent with the Bank’s central forecast for GDP growth to pick up, to average a bit above 3 per cent in 2018 and 2019. Business conditions are positive and non-mining business investment is increasing. Higher levels of public infrastructure investment are also supporting the economy. Stronger growth in exports is expected. One continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high.

Employment has grown strongly over the past year, although growth has slowed over recent months. The strong growth in employment has been accompanied by a significant rise in labour force participation, particularly by women and older Australians. The unemployment rate has been little changed at around 5½ per cent for much of the past year. The various forward-looking indicators continue to point to solid growth in employment in the period ahead, with a gradual reduction in the unemployment rate expected. Wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time. Consistent with this, the rate of wages growth appears to have troughed and there are reports that some employers are finding it more difficult to hire workers with the necessary skills.

Inflation is low and is likely to remain so for some time, reflecting low growth in labour costs and strong competition in retailing. A gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018.

The Australian dollar remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.

The housing markets in Sydney and Melbourne have slowed. Nationwide measures of housing prices are little changed over the past six months, with prices having recorded falls in some areas. Housing credit growth has slowed over the past year, especially to investors. APRA’s supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high. While there may be some further tightening of lending standards, the average mortgage interest rate on outstanding loans is continuing to decline.

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. Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

All pretty much as you’d expect, although the statements that “the housing markets in Sydney and Melbourne have slowed” and “housing prices are little changed over the past six months” are a little odd given dwelling prices are unambiguously falling.


  1. DingwallMEMBER

    “….. Australia’s terms of trade are expected to decline over the next few years”
    Does that fit with their growth expectations ?

    • Population growth = terms of trade drop. Naturally because we import domestic items.

    • Hoping for mana from the heavens in the form of “lower teh rates!”? I actually think Phil doesn’t want house prices to keep going up… at least on a personal level. he may have to deal with rusted on economic types though!

  2. Turns out there’s no evident difference between the RBA holding interest rates and holding their dongs.

  3. Can we just get a Dippy Bird to do this job and save the RBA salaries?
    No Change
    No Change
    No Change

  4. I actually thought there was a bit of a chance of a rate cut today, with the aim of keeping the SydMelb house boom running for a bit longer. Evidently they’re not at panic stations yet in aid of maintaining the value of their (and their politician mates) property portfolios.

  5. I thought they didn’t target house prices? Why mention them? Why not mention the price of dried figs?

  6. If they want to say house prices are little changed, don’t correct them. Personally I hope bears also cool their jets on this. I have nightmares of Keen telling red Kerry about the disaster ahead, then Red Kerry shooting those arrows at Rudd the next night. A week later we had a fhog and foreign buying restrictions relaxed.

    Personally, I don’t want any stomach churning falls, the death of a thousand ongoing cuts that government can’t really respond to will do me. And to quote Keating “mate I want to do you slowly, there’s gotta be some sport in this for all of us.” I want to see those ashen faced performances from the spruikers in the media, I want the number of Audis for sale on carsales to keep rising month on month, I want the cute personal assistant who does a bit of modelling on the side to realise standing around at an auction ain’t a job and she’s gonna have to drop that bikini for a People spread, I want Nathan’s acolytes to realise they’re royally f%$ked and weap tears of sorrow to Tracey Grimshaw. I want it all, but I’ll take it in the slow cooker thanks.

  7. Look you lot. Hate the RBA all you want, but Phil wants a housing slow melt. He does not want a crash and he does not want more debt-fuelled boom. The only possible good outcome from his perspective is flat or slow decline over years while wages catch up, to slowly defuse the giant nuclear device we have implanted in our national economy.

    I’m not saying he’ll get it. I’m saying it’s the best he can aim for.

    A big part of this is rates on hold. Cutting means debt boom. Raising means a crash. Rates are going nowhere.

    The other big part is the rhetoric. Keep things calm. Say the economy is steady. National house price drops ARE very small – what are we, back to early 2017 levels now (nationally). That’s genuinely f#ck-all. Never mind that bits of Sydney are down 20%, we need to keep everything calm.

    This is all you can expect of the RBA right now, they are in a hell of a tight spot and I reckon anything that keeps the next f#ckstick political can-kick at bay should be applauded.

    • And as posted above, I reckon we are on a slow slide but not to a soft landing. Over a cliff (unless the Chinese buyers come back).

      But the last thing we want is for the RBA to point this out.

    • agree with this – even in Sydney there are pockets of strength (within an overall falling trend).
      sales of vacant land on urban fringe still fairly brisk with firm prices.
      $2-3m detached home market on Lower North Shore also pretty decent.

      • Bjorn MeierMEMBER

        That’s not what I’m seeing in the LNS if you remove the REA fudges to auction data.

    • FiftiesFibroShack

      Yep. The last thing they want to do is cut. If they do cut, it will be forced by more than a ‘slow melt’ in the housing market.

    • As one commentator put it: “if interest rates remain below 5% pension funds will collapse, if interest rates rise above 3% entire countries will collapse”

  8. Jumping jack flash

    No rises. No cuts.
    Just constant interest rates while credit creation is slowed to a crawl.
    No credit, no sale. (Who wants to lose money? Hands please.)
    No houses for sale. No houses to buy. No need for credit.
    No houses for sale. No house price revaluation!
    No house price revaluation means house prices are forever locked in at their last size debt pile used to buy them.
    LVR good. Foreign banks don’t raise interest rates to roll bank debt over.
    “LVR is all good, the houses are still worth what we said they were 20 years ago. Nothing to see here. Now, buy my debt.”

    Banks sit back and harvest their debt slaves.
    Banks survive by feeding off their current crop of debt slaves until incomes begin to rise again – sometime after 30 years after debt reduces and disposable incomes increase allowing consumption.
    (Not considering the constant gouging from providers of essentials for life, maybe the government will put a freeze on utility prices, or subsidise them?)

    Then after 30 years (maybe less?) debt will have shrunk back to normal levels.
    Then interest rates can rise again.
    Then, after interest rates can rise, the economy can start to heal.

      • Jumping jack flash

        the rest of the world is going gangbusters, according to the RBA anyway.

    • Sounds great in an ideal world, but what will drive the economy if not rising house prices?

      • Jumping jack flash

        good question.
        I’m pretty sure they haven’t thought that far ahead.

        The prime directive is to protect the banks at all costs.

        The strategy is very similar to how the US got through their crisis (taken from the same book!) and it worked for them. It didn’t even take 30 years, maybe 10?

  9. An obvious point but love the line “Employment has grown strongly over the past year” then in the same paragraph “The unemployment rate has been little changed at around 5½ per cent for much of the past year” highlighting the massive 457-tire-spinning-without-going-anywhere rort going on to keep the growth lobby happy and GDP figures pumping.

  10. StomperMEMBER


    No wonder the economy has all the momentum of a sloth

    RBA is getting ups & downs about face! (HT @beckyquick83 who you all should follow)

    Today “the average mortgage interest rate on outstanding loans is continuing to decline”

    This from its May chart back – note the purple line (see link):


  11. China announced to buy coal from USA last week to reduce the trade imbalance, which will be followed by other minerals and farm products.

    In addition to a low interest rate, we must keep our AUD currency as low as possible to fight competition.