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Reserve Bank keeps interest rates on hold at December meeting

By Ebru Kopuz

At its final meeting for the year, the Reserve Bank has again decided to leave official interest rates on hold at the record low 1.5 per cent.

Interest rates have been steady since the cut last August. And it’ll be the last decision for the year, with the RBA not due to meet next until February 2017.

Although rates remain on hold, the latest data continues to reflect a generally patchy at best performance by the national economy. Residential construction and retail sales trends have weakened with wages growth and inflation at record low levels.

The lower jobless rates mask a sharp decline in full-time jobs with the dollar continuing to track at higher than desirable levels.

And housing markets remain mostly buoyant, with Sydney and Melbourne strong over spring and solid prices growth continuing. Other capital cities however are reporting largely moderate or benign housing market activity.

All of these factors considered together mean more official rate cuts remain likely in 2017 unless economic activity improves. These cuts would be irrespective of continuing strong house price growth in Sydney and Melbourne.

But if interest rates are cut next year, property price growth could be above 6 per cent in Sydney.

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