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Reserve Bank again leaves interest rates on hold for October

By Ebru Kopuz

The RBA has again decided to leave official interest rates at the record low 1.5 per cent over October where they have remained since August 2016.

Although economic data has improved this month with strong jobs growth reported by the ABS, unemployment steady and an improvement to the prospects of federal government’s budget bottom line, the national economy is not out of the woods yet.

The conundrum of stagnant incomes growth and low inflation despite improved labour market conditions remains perplexing for policymakers. The currency also remains too high and the recent residential building boom has now clearly ended.

The prospect of higher rates also remains fanciful under current macroeconomic conditions with the last increase in rates occurring nearly 6 years ago in November 2011 – which is a record period without an official rise from the RBA.

Early spring housing markets have produced mixed results with Sydney continuing to ease, Melbourne remaining robust but Brisbane flat.

Policies that have tightened lending to investors recently have clearly impacted activity from this group with significant housing market implications.

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