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Interest Rate Announcement

By Rebecca Zhang

The interest rates remain seated at 2.5% this month, which is the lowest they have been in 60 years. The Reserve Bank of Australia stated that the interest rates would remain at 2.5% considering the rising unemployment rate and  a decrease in the resource sector.

Considering that long-term interest rates remain low, financial conditions seem to be very accommodating. Equity and credit markets are also in a position where they can provide adequate funding.

The demand for labour has been fairly low throughout 2013. This has caused an increase in the rate of unemployment. There has been some improvement in the labour market recently, however, it will still take some time before the unemployment rate begins to decline consistently. Furthermore, the latest price data is a reflection of a decline in the growth of wages. In 2013, the economy grew at a below-trend pace. Some indicators of business conditions and confidence have improved from a year ago and exports are rising.

The continuing low interest rate will most likely incite higher levels of housing market activity which will yield great results for the Australian economy. Additionally, savers continue to search for higher returns in response to low rates on safe instruments, whilst dwelling prices have increased significantly over the past year.

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