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Interest Rate Annoucement

By Sam Kopuz

• Rates steady but signals remain mixed
• Stubborn unemployment but dollar easing
• More signs of moderating housing market activity

The Reserve Bank as widely expected has decided at its final meeting for 2013 to again leave official interest rates on hold. Rates have now been steady for the past 4 months following the August decision by the Bank to cut rates to a 60 year low of 2.5 percent.

Interest rates have fallen by 2.25 percent since the current easing cycle began in November 2011. Although the Bank is currently engaging in a wait-and-see approach on the effect of its stimulatory monetary policy on economic activity, recent results have nonetheless remained mixed.

The national trend unemployment rate rose from 5.7 percent to 5.8 percent over October with no indication of a sustained improvement emerging. Sydney’s unemployment rate at 5.6 percent remains a full percent higher than that recorded over October last year with Melbourne similarly at 6 percent a full percent higher than at the same time last year.

Building approvals continue to rise with another solid lift over October. However most of the increase in activity has been through a surge in apartment approvals in Sydney and Melbourne rather than a significant increase in house approvals.

The performance of local economies remains problematic and with continued concerns over the sustainability of a stubbornly subdued US economic recovery, the economic outlook remains uncertain. The dollar however has fallen over recent weeks and if it continues to weaken may act to stay the hand of the Reserve Bank on further rates cuts.

The prospect of rapid prices growth in local housing markets fuelled by low rates is diminishing with the Sydney market now alone in reporting strong buyer activity. Buyer activity in other markets remains largely flat or is diminishing from the growth levels recorded earlier in the year.

“The latest data continues to provide a mixed and patchy economic landscape with continued uncertainty over the short-term direction of the economy. With a falling dollar the Reserve Bank has decided to again leave interest rates on hold this month although recent statements have indicated growing uncertainty over the effectiveness of current monetary policy settings”, says Dr Andrew Wilson Senior Economist for Australian Property Monitors.

Source: www.domain.com.au

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