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Interest rates on hold

By Rebecca Zhang

The Reserve Bank has decided to leave official interest rates at the record low of 2.25 percent over April for the second consecutive month following early signs of an improving economy

The Bank cut rates in February after 16 consecutive months on hold reflecting concerns over the underperformance of the national economy.

The ABS however reported a steady national unemployment rate of 6.3 percent over February – the same as recorded for January. Building approvals for February increased 1.6 percent over the month for an increase of 13.2 percent over the year.

Housing market activity has continued to strengthen in most capital cities with lower rates and rising confidence fuelling higher buyer activity. Auction activity in Sydney, Melbourne and Brisbane has tracked at or near record levels over March with the Sydney market remaining particularly robust.

Although rates remain on hold over April the bias for future action from the Bank likely remains downwards. With some early signs of economic improvement the Bank may however be content to take a wait and see and approach over the shorter term mindful of the current historically low level of rates.

This approach may be enhanced by rising housing market activity on the back of lower mortgage rates with further rate cuts potentially fuelling strong prices growth particularly in the Sydney market.

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